Morrisons’ Potts makes more price cuts

By Nicholas Robinson contact

- Last updated on GMT

Morrisons could be gaining traction once again, according to analysts
Morrisons could be gaining traction once again, according to analysts

Related tags: Sainsbury's, Ftse 100 index

Morrisons boss David Potts has today (June 8) slashed up to a third off the prices of 200 everyday items in his latest bid to turn the beleaguered retailer’s fortunes around.

The cuts form part of the retailer’s three-year £1bn price-cutting strategy, which has so far seen the prices of more than 1,600 products slashed since March last year.

Semi-skimmed milk would drop by 11% to 89p and some bread brands would fall in price by 21%, according to the retailer.

Potts said: “We want to be the best value retailer – offering customers the best price for good quality British products.

“Today, we’ve reset some of our prices so that our cupboard essentials will be amongst the lowest on the market.”

Effects of the deep discounters

Big four price cuts in figures:

  • Morrisons: Pledged £1bn over three years
  • Sainsbury: £150M
  • Asda: £300M
  • Tesco: £200M

The big four retailers have committed to major price-slashing tactics in a bid to counter the effects of the deep discounters Aldi and Lidl, which recorded market shares of 3.9% and 5.4% respectively last month.

Asda had committed £300M to lowering prices in the first quarter of the year, Sainsbury £150M and Tesco had dropped the prices of 2,500 products.

However, the move would not “dissolve the price advantage” ​of the discounters, claimed Shore Capital analysts Clive Black and Darren Shirley.

“It does represent a structural reduction in their price differential and further supports our assertion that the free lunch that the majors provided for them has come to an end.

“With structurally superior features, such as large car parks, fuel, counter services, proprietary brands and choice, the narrowing price differential should erode the discounters’ momentum,” ​they added.

Black, who is a director and head of research at Shore Captial, told a Federation of Bakers’ conference last week that the discounters could be on a path to destruction​.

‘Person they tried to beat’

Aldi and Lidl had stocked more items in a bid to attract and retain customers, which meant they were “becoming the person they tried to beat”, ​he said.

Meanwhile, Morrisons was on the brink of being kicked off the FTSE 100 after seeing its share price tumble last week, but was reprieved at the eleventh hour.

Morrisons avoided an embarrassing end to its 14 years in the FTSE 100 after its shares rose by a whisker, following a 0.1% lift in sales, boosting its market value to £4.04bn.

City analysts suggested the turnaround signified Morrisons was starting to “gain traction” ​once again.

Head of retail and consumer insights at Kantar Worldpanel Fraser McKevitt said: “A committed core of loyal Morrisons consumers is responding positively to recent initiatives and business has been boosted by online sales.

“This is only the first step in any future recovery.”

Item

Old price £

New price £

Saving %

Heinz Mums Own Spaghetti Bolognese, 200g

£0.79

£0.55

30%

Hovis Original Wheatgerm, 400g

£0.75

0.59

21%

Shredded Wheat, 30 pack

£2.40

£2.19

9%

Tate & Lyle Fairtrade granulated sugar, 1kg

£0.69

£0.52

25%

Morrisons semi-skimmed British milk, four pints

£1.00

£0.89

11%

Morrisons free-range eggs, medium, 12 pack

£1.89

£1.69

11%

Morrisons British butter, 250g

£0.95

£0.88

7%

Morrisons Savers tuna chunks, 170g

£0.79

£0.57

28%

Morrisons Savers orange juice, 3x200ml

£0.45

£0.40

11%

Related topics: Ambient foods

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