TROUBLED supermarket chain Morrisons is slashing margins to compete more closely with the discounters. Last month’s move raised fear of a price war, with commentators speculating that Asda and Tesco would join Morrisons in a race to the bottom.
The move came as the retailer posted a £176m pre-tax loss after exceptional writedowns. Underlying pre-tax profits fell 13% to £785m, with like-for-like sales down 2.8%.
CEO Dalton Philips’ solution is to invest £1bn over three years to bring prices down closer to Aldi and Lidl. He acknowledged that the market had changed and that price was driving traditional Morrisons’ customers towards the discounters.
“We are looking to narrow the price gap,” said last month. “We don’t need to match them outright. When the gap widens, more of our customers switch. When we become closer, they come back.”
The chain will keep its fresh food operation but cut the number of promotions by 10%. A Morrisons’ loyalty card, which will begin trials this spring, will be designed to allow the store to target its special offers more efficiently.