Morrisons bags better than expected profits

The supermarket chain reports pre-tax profits of £440m but warns that consumer confidence remains 'fragile'.

by Elizabeth Anderson
Last Updated: 07 Jan 2013

Customers are pinching the pennies at the moment as wages are squeezed and the cost of living rises, and Morrisons has been bearing the worst of the brunt and slipping behind its rivals.
 
But the supermarket chain’s half year results were better than feared today. Pre-tax profit was £440m in the first six months of the year - well above forecasts of £434m – and the Bradford based grocer said it was on track to meet its expectations for the year.
 
The fizz was slightly flat though. Profits were down £9m on a year ago and like-for-like sales, excluding VAT and petrol sales, fell 0.9%, compared with a 2.2% rise last time.
 
Dalton Philips, Morrison’s chief executive, warned of ‘the sustained pressure on consumer spending’ and the firm said that ‘already fragile consumer confidence and market conditions’ are becoming even more challenging.

 Morrisons, which has 455-stores, is the UK’s fourth biggest supermarket chain behind Tesco, Asda and Sainsbury’s. It hasn’t been the only one suffering falling sales as worries about unemployment and falling disposable incomes means customers are cutting back across the sector. Supermarket giant Tesco is still recovering from a shock profit warning in January and recently posted a 1.5% fall in like-for-like sales.
 
Nevertheless, Morrisons has been the worst hit. Recent industry data from Kantar Worldpanel showed sales growth was slower for Morrisons than at Tesco, Sainsbury and Asda.

Morrisons hopes to turn this around by scaling back plans for larger stores and concentrating on expanding its ‘M Local’ convenience stores, particularly in London. It’s part of a capital expenditure programme hoping to save £200m over the next two years.

The supermarket will also make its long-awaited debut into online grocery shopping – although it’s been hinting at this for a while and nothing’s come of it so far. Morrisons is the only one of the ‘big four’ grocers that lacks an internet presence. Is it about to switch on?

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