David Potts, the new chief executive of Morrisons, might be forgiven for feeling a little nervous ahead of the supermarket group's annual shareholder meeting tomorrow.
At last year's meeting, Potts's predecessor, Dalton Philips, was publicly castigated by former boss Sir Ken Morrison, who described his strategy as "bullshit". Seven months later, Philips was sacked as the performance of Britain's fourth-largest food retailer went from bad to worse.
Plain-talking Sir Ken (83), son of the supermarket group’s founder, ran the business for nearly half a century. He was appointed life president following his retirement and is not afraid of voicing his displeasure if he feels things are not being done right, as Dalton Philips found to his cost.
It’s not just his past history and honorary position that keeps Sir Ken motivated: although it has been reduced in recent years, the family holding in Morrisons remains a chunky 8 per cent or so.
Potts, meanwhile, spent nearly four decades working at rival Tesco before signing up with Morrisons in March. He joined Tesco at the age of 16, as a shelf-stacker, but left in 2011, before most of Tesco’s current problems had emerged.
Potts has yet to outline his strategy for Morrisons in detail, but he has made a number of moves in his first two and a half months. He has cut out a layer of bureaucracy from the Bradford head office, axing just over 700 jobs while pledging to boost service levels in the stores by hiring 5,000 extra staff for the shop floor.
Dropped Ant and Dec
The group has also parted company with Ant and Dec, the TV presenters who fronted its multimillion-pound advertising campaign. And, in a move that met with the wholehearted approval of Sir Ken, it has binned the controversial fruit and veg “misting machines” introduced by Philips.
As Potts prepares to meet shareholders for the first time, there was good news and bad news on Tuesday. The good news came from latest industry figures, published by Kantar Worldpanel, showing Morrisons’ sales had increased. The rise was just 0.1 per cent in the 12 weeks to May 24th, but it was the first the company has managed since December 2013.
The performance outstripped the other Big Three UK food retailers (Tesco, Sainsbury and Asda), which all suffered falls in the same period as discounters continue to pile on the pressure.
But the bad news is that Morrisons is almost certain to be demoted from the prestigious FTSE 100 index following a near-15 per cent slide in its share price over the past 12 months. The group first entered the leading share index in 2001, when it was valued at around £3 billion, a figure that had climbed to £9 billion by 2007.
At last night’s closing price of 172.5p, however, the business is valued at £4 billion (€5.5 billion).
It’s not just being booted out of the FTSE 100 that will cause shareholders unhappiness. Protests are also expected over the £3 million (€4.2 million) payout given to Philips, who received a bonus last year even as Morrisons racked up losses of almost £800 million (€1.1 billion). A significant protest vote is expected against the group’s remuneration report.
Morrisons will also face calls from activists to improve pay for its shopfloor staff, part of a co-ordinated campaign aimed at persuading major retailers to adopt the Living Wage for workers. A number of other retailers, including fashion chain Next, have already faced similar protests at their annual meetings.
Sir Ken on side
That’s more than enough for a new chief executive of a struggling business to cope with. But at least there is one problem Potts probably won’t have to worry about on Thursday: public humiliation at the hands of the life president.
In a canny move, the new chief executive has enlisted the help of Sir Ken in his quest to turn the business round. The two have been visiting stores together and, as Sir Ken puts it, “comparing notes”.
Potts has made a number of good strategic decisions since he joined Morrisons. But getting the old boss on side is probably one of the smartest.
Fiona Walsh is business editor of Theguardian.com
