Who would have thought just a year ago that Morrisons, under new Canadian boss Dalton Philips, would be planning to dramatically increase its non-food business while long-term market leader Tesco, under new CEO, Phillip Clarke, would be facing a UK sales slump?
But they are. Morrisons is planning to buy some or all of Best Buy’s big UK stores (which closed before Christmas) to boost its Kiddicare acquisition while Tesco’s house broker Deutsche Bank (which ought to know) is predicting that its UK sales slumped two per cent over the Christmas and New Year period. Morrisons’ own sales are predicted to be up about one per cent.
Morrisons bought the Kiddicare online business for £70m last February and obviously likes what it’s seen so much that it thinks the brand can support a substantial bricks as well as clicks business. One reason for this may be the much-advertised problems at specialist retailer Mothercare which has served up three profit warnings in the past year.
Best Buy’s stores are on the market because the US retailer’s joint venture with Carphone Warehouse in the UK proved to be a huge flop although Carphone seems to have done rather better from its foray with Best Buy in the US. Until it bought Kiddicare Morrisons had stayed out of the non-food business in the UK.
Tesco, on the other hand, has a big non-food business in the UK but this has suffered through the recession. But it has bigger problems than that. It’s being squeezed at the top of the food market by go-ahead Waitrose and Sainsbury’s and crowded out at the bottom by rejuvenated Asda and Morrisons.
Some of its stores are a mess with not enough staff serving fresh products and, at the weekend, its lottery queues stretch out of the door. And it hasn’t run a decent advertising campaign for years, the last one being the ‘Dotty Turnbull’ ads with Prunella Scales about a decade ago. Its latest idea, the ‘Big Price Drop,’ (pictured) with a promised £500m of price cuts has so far completely failed to revive its fortunes.