Morrisons saw a decline of 51% in their profits during the summer, after it cut prices on around 1200 items by an average of 17% during May.
For the same period, Waitrose’s operating profits declined by 9.4% as it also had to invest in store renovations and price cuts. Ocado saw a 15.5% increase in sales for the 12 weeks to 10 August due to the benefit derived from home deliveries. The numbers of orders received increased by 17%, however there was disappointment about the level of growth as customers spent less per order than one year before.
All the large supermarkets are trying to hang on to their shoppers who are being enticed by lower prices from Lidl and Aldi. This has prompted stores, such as Tesco and Asda, to cut their prices on baskets of everyday items.
Aldi’s advancement received attention as it announced that it plans to spend £70m on extensions to its UK head office as part of a larger scheme to almost double the number of its UK stores to 1000 by 2021. This implies opening six stores per month, every month, over the next six years.
The pressure on prices is expected to reach a high after Tesco, the largest supermarket in the UK, appointed a new chief executive. He is expected to act in a more aggressive manner regarding prices that his predecessor.
Morrison’s plans on spending 25% more on price cuts from now until January, than it did on its summer campaign. The chain made use of £135m for price cuts and product improvement during the first half, but it has £165m in hand for the run up to Christmas. Most of this budget will be spent on price cuts, with some of it going toward the improvement of quality of its own-label foodstuffs.
Analysts stated that the price cuts at Morrisons are based on desperate marketing, which is simply creating an illusion of new business. Morrisons denied that it was trying to buy sales with its voucher campaigns, but hopes to attract more shoppers with these efforts by the end of this year.
15 SEPTEMBER 2014, United Kingdom
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