Retail analysts consider Morrisons’ options as festive sales tumble 2.5% after shoppers turn to supermarket rivals

Kate Calvert, Seymour Pierce

“Morrison has had another difficult Christmas, showing that management’s more aggressive promotional strategy has not resonated with customers. Its fresh focus has perhaps taken the offer too far away from its traditional value roots and we are not convinced there is a fresh/craft differentiated niche to be carved out.”

James Collins, Deutsche Bank

“[Online] will take some time – and start-up cost – to address, while management appears to be banking on changes in [communications] in the short term, part of which will be the new TV ads and programme sponsorship of Ant and Dec, who are, apparently, ‘in 20% of UK households every weekend’. We think, in the current climate, in particular, that customer behaviour won’t be heavily influenced at the margin by more awareness of provenance, points of difference etc, and that historic attempts to drive this as a point of difference did not yield much response.”

Jon Copestake, Economist Intelligence Unit

“Morrisons has been slow to respond to the increasing role of e-commerce and has been trailing behind competitors on the move to convenience channel formats. These factors have combined with a weak market sentiment in 2012 and a growing tendency towards polarised shopping habits which has pressured the mid-market retailers. Christmas trading is especially telling for retailers because it is usually a time for consumers to ‘trade up’ to more premium sellers, as evident by the strong results posted by Waitrose over the festive period.”

Joseph Robinson, Conlumino

“Unfortunately for Morrisons, it has found itself squeezed in a market characterised by falling customer loyalty and low volume growth. With the volume of promotional activity intensifying, the grocer has been unable to deliver a strong enough value message. Indeed, Morrisons’ update cites vouchering as a factor, which suggests Tesco’s aggressive investment with a view of retaining the initiative in the UK market is having a marked impact. Furthermore, the prevailing northern bias of Morrisons store portfolio has left it more susceptible to the general economic malaise and a rising tendency among consumers to view the hard discounters as a viable alternative – for quality, as well as price.”