Morrisons are cutting their prices again - but does anyone care?

16 February 2015

morrisons 300x300 Morrisons are again cutting their prices in a bid to fend off the challenge from Lidl and Aldi. They've dropped the price of eggs, butter, milk, bread, coffee, pasta, sugar and juice by as much as 56%.

The thing is - will anyone actually care about this? The fact is, for many, Morrisons is neither here nor there. It's a little dowdy and dull; not functional and straight-forward like cheaper supermarkets and not fancy enough like more upmarket shops.

So, cutting the price on 130 own-brand and branded basics might not change consumer opinion. Morrisons seem adrift on the high street, with no-one looking at them for quality or savings.

That said, these price cuts are here for the long term, as Morrisons are keen to point out that this is not a short promotion to get people back through their doors. Marketing director Nick Collard adds: "The price cuts we have now made across products that customers buy week in, week out, are making a real difference to the cost of the weekly family shop."

Across their products, the savings amount to 22% off, with the biggest saving coming with their own brand egg and spinach taglietelle. Is that enough to entice you into their aisles?

We'll have to see, but Morrisons look like they need to do something pretty drastic if they want to be relevant - and no, we're not talking about stadium rock veg stands.

TOPICS:   High Street News


  • roro01
    Morrisons' lower profit for 2014 is due to timing difference: The company cut prices in early 2014 at a cost of £300m per year but said this will be offset by cost cutting of £300m per annum. The price reductions have immediate effect on profits whereas cost cutting takes longer to implement - for example, making 2600 junior managers redundant - hence the profit guidance for the current year provided by the company is £335m to £365m. This means that after implementing the planned cost cutting the profit will go up to £635m - £665m. Morrisons has promised a total dividend of 13.65p per share for the current year - a yield of 7.4%. Morrisons dividend is safe as the company is confident it can cut cost by £1b and generate net cash flow of £2b over three years, against a backdrop of falling net debt - already fell from £2.85b to £2.6b in the third quarter and the company expects year-end net debt of £2.3b-£2.4b. Morrisons is trading just above its tangible net asset book value of 181p per share. The latter implies zero goodwill book value and forecasts of zero profits so a price under 181p per share implies forecasts of losses whereas goodwill at book value = 20p per share and the company is a cash cow still generating hundred of million of pounds of profit each year. The profit guidance for the current year provided by the company in November is £335m - £365m. Calculations I made some time ago: Morrisons market capitalisation at a price of 176.7p = £4.12b, enterprise value (market capitalisation plus net debt of £2.6b) = £6.72b whereas market value of freehold properties = about £9b (Morrisons' pension fund is fully funded). The latter is HIGHER than the enterprise value by £2.28b. To put it another way: Even if, theoretically, Morrisons were to decide today to stop trading and liquidate itself investors would be BETTER off as market value of its property per share = 385p (£9b/2335.08m shares), its net debt per share = 111p (£2.6b/2335.08m shares), so after paying off all its liabilities the value per share would be 274p which is much, much HIGHER than the current stock market price of 176.7p. 
  • soapy
    Think you missed the bit about no-one caring about them?
  • Jessie J.
    Morrisons’ lower profit for 2014 is due to timing difference That is as far as I got.
  • George C.
    Something something prices something.
  • digibanger
    im with the 3 lower posts, yawn.....

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