The squeezed supermarket middle

It's been a tough week for the big supermarkets following the sacking of Morrisons' CEO Dalton Philips.

It's been a turbulent week for retailers. Following Tesco's decision to shut 43 shops and cut 1,000 jobs, J Sainsbury plans to trim 500 staff at store support centres. And Wm Morrison has sacked its CEO, Dalton Philips, after five years in the job. The group's profits halved over the past year as sales slid.

Christmas sales were down 3% on last year, an improvement on 2013 but still inferior to rivals' figures. Chairman Andrew Higginson said it was time for a "fresh pair of eyes". His successor "won't be anyone with L-plates in food retail".

What the commentators said

It takes at least six months for customers who don't shop at a store regularly to perceive a price change.

And it hardly helps that the group's new loyalty card, Match & More supposed to match prices at discounters Aldi and Lidl as well as Morrisons' peers is too complicated. But the bigger problem was that he made "too many mis-steps" before hitting on the right approach.

Philips inherited a supermarket lacking the high-growth segments: convenience stores and an online offering. But his efforts to rectify this were accident-prone, said Andrew Clark in The Times.

He bought an online childrenswear shop to gain digital expertise. It lost a fortune. Then he got Ocado onboard. The upshot is that the group still only makes 15% of sales online.

Morrisons moved upmarket, but "lacked the product range and specialisation to be a hit at the premium end", said The Independent's Chris Blackhurst. It then lost its reputation for low prices as Aldi and Lidl flourished.

Now it is the smallest of the players in the middle of the market grappling with stiff competition at the top and bottom. Will Philips' successor "really be able to do any better?".

Recommended

There is light at the end of the tunnel for investors
Sponsored

There is light at the end of the tunnel for investors

Investors are gloomy. But it’s not all bad, says Max King – the mood could be about to shift. You just need to hold your nerve for a little while long…
27 Sep 2022
The hidden cost of employee share schemes
Investment strategy

The hidden cost of employee share schemes

Paying employees in shares comes at a cost to investors – but it isn’t always easy to see how much, says Stephen Clapham.
26 Sep 2022
Three top-notch Asian stocks to buy
Share tips

Three top-notch Asian stocks to buy

Professional investors Adrian Lim and Pruksa Iamthongthong, managers of the Asia Dragon Trust, pick three of their favourite Asian stocks to buy now.
23 Sep 2022
Why you should short this satellite broadband company
Trading

Why you should short this satellite broadband company

With an ill-considered business plan, satellite broadband company AST SpaceMobile is doomed to failure, says Matthew Partridge. Here's how to short th…
23 Sep 2022

Most Popular

Beating inflation takes more luck than skill – but are we about to get lucky?
Inflation

Beating inflation takes more luck than skill – but are we about to get lucky?

The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank…
26 Sep 2022
The pick of this year's best-performing investment trusts
Investment trusts

The pick of this year's best-performing investment trusts

Market conditions haven’t been easy, but these investment trusts have delivered strong growth, says David Stevenson.
23 Sep 2022
The hidden cost of employee share schemes
Investment strategy

The hidden cost of employee share schemes

Paying employees in shares comes at a cost to investors – but it isn’t always easy to see how much, says Stephen Clapham.
26 Sep 2022