High hopes rest on Morrisons’ new chair
Former Tesco executive Higginson will join the retailer’s board on October 1, as non-executive deputy chairman and chairman elect, ahead of the retirement of Sir Ian Gibson next year.
City analysts Shore Capital welcomed his appointment as “a top quality new chairman to guide Morrisons ahead”. While at Tesco, the retail boss had delivered success for shareholders, employees and shoppers, they said. During his 15 years with the nation’s largest retailer, Higginson served as chief finance officer, head of strategy and was responsible for retailing services under Sir Terry Leahy. He is currently chairman of Poundland.
Shore Capital analysts Clive Black and Darren Shirley warned Higginson faced a tough time in reversing the retailers “penal market share losses”. Key to Morrisons’ problems was its reliance of a vertically integrated model that relied on a high proportion of in-house food manufacturing, they argued.
‘Never really recovered’
“A vertically integrated business has never really recovered from the flawed 'Fresh Formats' programme to our minds,” said Black and Shirley. Also new revenues for growth, convenience and online, are compounding the pressure on profitability at a time of negative operational gearing.
It remained to be seen how Higginson will influence Morrisons’ new strategy of lower prices and slashed costs announced in March, as it battled pressure from ascendant discount retailers Aldi and Lidl. Shore Capital did not expect significant improvement in the retailer’s sales or profitability in the near future, bearing in mind the time needed for the changes to take effect and the weak recovery in the UK grocery market.
Higginson joins a senior management that has been widely vilified for its business strategy by Sir Ken Morrison, the retailer’s former chairman, and a former director. Speaking at retailer’s annual general meeting in June, Morrison publically denounced the recovery strategy of ceo Dalton Philips as “bullshit”. http://www.foodmanufacture.co.uk/Business-News/Morrisons-ex-chairman-attacks-management
Publically denounced
In April, Roger Owen, a property director at Morrisons for 22 years until 2009, called for Gibson’s resignation.
Meanwhile, at the end of last month Gibson praised Higginson’s “tremendous reputation and a distinguished career at the forefront of retailing” in the UK.
Higginson acknowledged “the undoubted challenges in the industry at the moment” but praised the “a fine business” and looked forward to working with “the great team”.
The scale of the challenge facing Morrisons was defined by Kantar Worldpanel’s latest figures, published at the end of last month.
It revealed the retailer’s share of the retail grocery market had fallen by 3.8%, alongside Tesco’s share, for the 12 weeks ending July 20, compared with the same period of last year.
During the same period discount retailers Aldi and Lidl achieved record growth rates of 32% and nearly 20% respectively. Aldi’s now accounted for 4.8% of the grocery market, while Aldi claimed 3.6%.
