Morrisons chief executive Dalton Philips has revealed a strategic overhaul and has signalled an acceleration into online grocery retailing.
He plans to concentrate his business on selling food, eschewing the hypermarket strategy adopted by rivals, while leveraging his strategic partnership with Ocado to compete online.
Today's announcement coincided with the firm's annual results. It is in part a reaction to changes in consumer behaviour as people shop more locally, online and less frequently at big stores.
But the plans, including big price cut plans, are also designed to fend off the mounting challenge posed by the German discounters and focus efforts on lower prices and fresh food.
The Bradford-based retailer reported a pre-tax loss of £176m for the year to February 2 after writing down the value of its property, IT, and baby equipment retailer Kiddicare. Philips said he would sell off parts of the business that were no longer central to his strategy, dispose of £1 billion of property and engineer £300 million price cuts.
'The strategy we are announcing today is a bold and comprehensive response to the fundamental structural changes that are taking place in grocery retail,' said Philips.
The announcement - seen as a similar pressing of the 're-set' button by Morrisons as Tesco did two years ago - knocked the shares of both Tesco and Sainsbury's with a total of around £1.3 billion lost across the value of all three retailers.
Morrisons said it would sell its Kiddicare and its stake in New York-based food delivery firm Fresh Direct. Observers took to mean it was focusing its online efforts in its partnership with Ocado.
Morrisons and Ocado signed a £216 million deal last year which saw the launch of Morrisons.com in January. Ocado also operates online pets retailer fetch.co.uk and plans to launch further specialist online shops as soon as this year.
Morrisoins said its fledgling online business was 'performing ahead of plan' and that it would also trial an 'innovative click and collect format' this year.
The company said of Morrisons.com: 'Feedback from our new customers has been extremely positive and trading to date has surpassed our initial expectations.
'We differentiate our fresh offer, just as we do in store, addressing our customers' demand for freshness by offering an expert review quality rating and by allowing them to check the freshness of products on their doorstep, before accepting them.
'This is one of many learning points from our association with Fresh Direct, a leading, New York based, online food business, in which we took a stake in 2011. We have learnt a huge amount from this association and have incorporated many of their concepts into our new food online proposition. With an experienced management team in place and Morrisons.com now successfully launched, we no longer need to retain this investment and will therefore dispose of it at the appropriate time,' it said.
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