SUPERMARKET Morrisons says it will cut prices and take on discount rivals after reporting £176m annual pre-tax losses.
The company saw like-for-like sales fall 2.8 per cent for the year to February 2, with bosses warning the group faces its biggest test in the grocery sector for more than 50 years.
The group said earnings were wiped out amid declining sales and exceptional costs of £903m from write-downs on the value of its stores and the planned sale of its Kiddicare children's wear retailer.
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Chief executive Dalton Philips said Morrisons had the most to lose, with shoppers choosing budget stores Aldi and Lidl to save cash.
The group reported £879m profits last year, but has issued a profits warning for the financial year.
Mr Philips said it plans to invest £1bn over three years and launch a new loyalty card scheme.
He said: “We are going to lower our prices on a permanent basis.
“The biggest challenge that we face is that there has been a fundamental change in how consumers view discounters.
“They are no longer going to them out of necessity. “The perception has changed and there is a new price norm.”
Morrisons will sell off £1bn of its £9bn property portfolio by 2017, including a small number of stores.
Mr Philips added: “The strategy is a bold and comprehensive response to the fundamental structural changes that are taking place in grocery retail.”