Morrisons tills ring in the profits

Store openings, a rise in own brand sales and the shopping nous of 'professional' bargain-hunters helped Morrisons to post profits of £947m in 2011.

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013
The supermarket can do no wrong. Sales just keep going up, even as Morrisons’ rivals blame harsh trading conditions for contracting earnings (although Waitrose saw similar gains last year too). Pre-tax profits are up 8.4% on last year and customer numbers are soaring: Morrisons tempted 400,000 more customers through the doors every week in 2011.

Its 34 new store openings have been a real sales driver, and the core focus on fresh produce still draws in the custom, pushing turnover up 7% to £17.7bn. Plus, a new trend for ‘professional shopping’ has also added to the lines at the checkout. These are customers who carefully price-check the costs of items and share deals over social networks and money-saving websites.

‘It’s a phenomena we've been seeing for the last six, eight months or so,’ says Morrisons' chief executive Dalton Philips. ‘They are shouting about the bargains that they see out there, going onto social media checking for them and communicating them.’

Usually price wars force supermarkets to take a hit on profit, but Morrisons’ margins have been protected by successfully relaunching the M kitchen and M savers own brands. And there’s the ‘productivity improvements’ – cost-cutting to the rest of us - in stores , saving 2.9% on the bottom line. Distribution has been streamlined, helped by the opening of a new South West regional distribution hub, saving 4.3%.

But there are a few flies in the ointment. Namely, fuel prices: ‘With unleaded prices at the pump up by 15.4p per litre and diesel increasing by 18.5p, motorists were paying an average of 15% more per litre at the pump than they did last year,’ says Morrisons’ chairman Sir Ian Gibson. All of the margin and like-for-like profit increases (up 20bps and 1.8% respectively) are excluding fuel.

‘We know that 2012 will be tough,’ says CEO Philips , keen to inject a note of caution. But with big plans afoot to roll out an e-commerce site this year and a raft of new convenience stores and further shop openings, Morrisons might just maintain its lucky streak.

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