Very disappointing Christmas holiday sales have signaled the end for Dalton Philips, Morrisons' current CEO. The British retailer has been through some rough weather recently and a new captain will have to steady the ship.
Like-for-like turnover down 6.3 %
Morrisons's holiday performance was by far the worst out of all large British retailers, with a 6.3 % like-for-like turnover drop in its third quarter compared to the year before.
Tesco can look ahead after a better Christmas sales period than its entire third quarter, while Sainsbury's has managed to lower its turnover drop (- 1.7 %) compared to the second quarter. Nevertheless, the latter has experienced its worst Christmas period in 10 years.
No more tricks for Morrisons
Tesco's like-for-like turnover drop was a mere 0.3 %, much better than in previous weeks. Without its Christmas sales, it would have had a 4.2 % turnover drop in its third quarter, but excellent sales have helped dampen the blow to - 2.9 %.
Morrisons cannot spin its numbers positively at all: the fourth largest British retailer had a 3.1 % like-for-like turnover drop in the 6 weeks leading up to 4 January. The Christmas period was no help, which has led to a hugely disappointing 6.3 % like-for-like turnover drop for the full quarter.
No positive signs at all
Even though Morrisons slightly improved on its like-for-like turnover in previous quarters (- 7.1 % and - 7.6 % in its first two quarters), the importance of the Christmas period and its weak performance mean that the group has very little to be positive about.
CEO Dalton Philips still tried to see the positives: "I would like to thank colleagues for delivering a stronger Christmas proposition for our customers. Our like-for-like sales were a step-up on recent quarters and trends in the key operational measures continued to improve", he said.
"Return the business to growth"
His words were to no avail, as the company announced in a separate statement on board changes that it will be searching for a new CEO, drawing Dalton Philips' 5-year reign as CEO to a close. He will stay on until his successor has been found and appointed.
"In the next chapter of Morrisons development, we need to return the business to growth. The Board believes this is best done under new leadership", Andrew Higginson (former Tesco financial director at Tesco and Morrisons' new chairman of the Board of Directors) said.
Tesco defiles image of British retail
Morrisons is Britain's third large retailer that has published its Christmas-focused quarter, following Tesco (- 2.9 %) and Sainsbury's (- 1.7 %). ASDA, the fourth of the Big Four, will publish its numbers on 19 February, when its parent company (Walmart) releases its fourth quarter numbers.
Andy Clark, ASDA CEO, recently spoke to the British press and had some negative comment about market leader Tesco. He feels Britain's retail image has been defiled by Tesco's accounting scandal, which he likens to the damaging effect the horse meat scandal had on Britain's meat industry.
New Morrisons CEO faces uphill climb
Despite his criticism, Clarke is confident that Tesco will overcome all challenges, but he does admit that the competition in British retail is razor sharp and that there are many challenges ahead.
There will be winners and losers and considering Morrisons' performance, it is definitely one of the losers. Its new CEO will have to get the retailer's motor running again, which is quite an ambitious challenge, especially as Aldi and Lidl have performed very well and other retailers are also prepared to be very competitive when it comes to pricing. With these challenges in mind, it remains to be seen who would be willing to take up the gauntlet and become Morrisons' new CEO.