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Morrisons boss Dalton Philip: "We're taking the bold decision to ensure that we are giving our customers the very best price"
Supermarket chain Morrisons has reported a £176m loss for the year to the end of February, and announced a major restructuring of the business.
It said it would target the market between discounters and the "big four" retailers as a "value-led grocer".
But it warned that profits in the coming year would be less than £375m, about half the level last year.
Chairman Sir Ian Gibson called it a "disappointing year for Morrisons" as turnover fell by 2%.
End QuoteAlthough the scale of what's gone wrong at Wm Morrison is unusual, its woes highlight challenges faced by all mainstream supermarket groups"
The company was hit by a one-off £903m exceptional writedown, due to property and IT costs and a disappointing performance from Kiddicare, its baby products business.
Shares in Morrisons tumbled more than 10% in early trading before recovering slightly. However, it remained the worst performer on the FTSE 100.
RestructuringChief executive Dalton Philips told the BBC how the firm would restructure: "This isn't about being a discounter. This is about offering really great value.
"There is a tipping point where the price perception gap has just widened too far between the discounters and the big four and we're going to address that."
"We have identified over a billion pounds that we can take out of our business now and that billion pounds is going to be invested back into our proposition to get those lower prices for our customers."
Continue reading the main storyHe said Morrisons would invest in increased efficiency, lower prices, more targeted promotions and a Morrisons loyalty card, so it could track the shopping habits of its customers.
Morrisons suffered badly at Christmas, with a "double whammy" of voucher offers from the big four supermarkets and lower prices from the discounters.
"We have to recognise this is a paradigm shift, the rules of the game have changed. There is a new price norm" Mr Philips said.
Online
Morrisons' online business Morrisons.com has lagged behind the big four supermarkets.
Morrisons only started deliveries through online grocer Ocado in January after signing a £200m 25-year deal last year. The service covers 20% of UK households
The firm has also been slow to recognise the move from big out-of-town stores to local convenience stores. It opened 90 last year, and but plans 100 new ones this year.
It is planning to sell Kiddicare and its stake in New York-based food retailer, Fresh Direct, which it said were not core businesses.
Morrisons increased its dividend by 10%, but said dividends would increase more slowly in coming years.
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