What does Morrisons know that everyone else doesn’t? While the rest of the high street flounders, the supermarket chain has bucked the trend by recording a 19% jump in pre-tax profits, notching up £295m in the six months to August 3. Like-for-like sales were up 7.6% (and that’s not including fuel – up 32%), as its low prices apparently brought in an extra half a million punters every week. CEO Marc Bolland said the results were ‘a clear testament to the strength of Morrisons recovery’, and with the prospect of more good news to come, he’s hiked the dividend by 19%.
Over at John Lewis, however, the department store long seen as a barometer of high street fortunes, the picture was a lot less rosy. Pre-tax profits sunk by 27% to £108m for the six months to July, while elsewhere in the group, even the ever-reliable Waitrose saw profits slide by 8% to £103m (so it’s not the case that all grocers are doing well). Across the board, group sales were up a measly 4%, with the property slump apparently taking a serious toll on homeware sales. And chairman Charlie Mayfield suggested that things weren’t likely to improve any time soon: ‘Conditions for the rest of the year will continue to be challenging with ongoing pressures on consumer spend,’ he bemoaned today.
And it’s not the only one feeling the pain from the slowdown in consumer spending. Yesterday the fashion retailer Next reported a 12% fall in profits for the last six months, and said it could ‘see no reason why there should be any recovery…during the next six months.’ It was a similar story from Home Retail Group this morning; it confessed to a 5.8% drop in like-for-like sales at Argos and an 8.3% fall at Homebase, blaming the ‘difficult consumer environment’.
Even Morrisons admitted that this was the ‘toughest trading environment seen for many years’ – though this doesn’t seem to have stopped it raking in the cash. According to Bolland, that’s because its low prices have been attracting customers keen to cut down on their bills: ‘More shoppers are choosing Morrisons because of our price-crunching deals and our unrivalled fresh offer in store,’ he said today. Although there has been some food price inflation in evidence, its focus on slashing the price of everyday items is clearly paying off - it's the non-essentials that people are cutting back on (hency why sales of organic food are in the dog-house). Or maybe it’s all down to those Denise van Outen adverts.
Either way, it’s another impressive result for Morrisons, in an environment where most retailers are struggling to keep their heads above water. If Bolland carries on like this, he might end up with the M&S job...