Initiatives – such as the retailer’s ‘Made by Morrisons’ – would help the troubled business provide a stronger offering to consumers, Shore Capital’s analysts Clive Black and Darren Shirley said.
“Already we see encouraging initiatives such as ‘Made by Morrisons’, more new lines that are better profiled and clearer, and more impactful promotions/gondola ends plus better availability in most of the stores that we visit,” they said.
Morrisons’ “stronger proposition” would also be built around individualistic pricing, product authenticity and provenance and a focus on the exclusivity of its Market Street, they added.
The retailer would continue to fix the fundamentals of the business, off the back of listening to consumers, and reshape its management board before shouting about the changes, Black and Shirley said.
“That change makes for a relatively low overall profile for Morrisons in the UK grocery market at this time,” they said.
“In seeking more solid fundamentals the business, sensibly in our view, management is stabilising matters before it seeks to welcome more shoppers with a stronger proposition in due course.”
Morrisons reiterated its six-point plan to become more competitive and return the business to growth.
These included exiting from underperforming assets, such as Kiddicare and M-Local; £1bn programme to lower operating costs; £600M reduction in working capital; almost £1bn cut in capital expenditure and a commitment to run to a rate of £400M – £450M.
Morrisons has already lowered its working capital to £350M.
Clearly, Morrisons needs an improvement in trading for its shares to appreciate in value, Shore Capital claimed.
“Aside from deflation, Morrisons’ top-line also suffers from the expedition of the necessary simplification process as management seeks to unwind a myriad of initiatives, which proved ineffective in driving sales in the past,” it added.
Over the next three to six months the business should be cleansed of all the bells and whistles of pay-day promotions, Christmas collector schemes, Match & More and wider promotions, coupon and vouchering, Shore Capital said.