Morrisons ‘encouraged’ by progress despite further slide in sales
Supermarket chain Morrisons has revealed another big drop in sales as it grapples with an “intense” period of competition in the sector.
The company admitted its recovery will take time after it posted a 6.3% drop in like-for-like sales in the 13 weeks to November 2.
The figure was better than the 7.4% fall reported for the previous six months, while chief executive Dalton Philips said he was encouraged by the progress of initiatives designed to help the chain recapture market share.
As part of a wider plan announced in March to invest £1billion in price cuts over three years, the company recently launched a new loyalty card scheme which promises to match prices at discounters Aldi and Lidl.
There have been signs that the strategy is starting to pay off after closely watched data from Kantar Worldpanel pointed to an improved sales trend.
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Mr Philips said today: “Morrisons is meeting the challenges created by a period of intense industry competition and structural change with quick and decisive action.”
The company pointed to an improved trend in its key performance indicators, with the number of items per basket now down 2.4% year-on-year, significantly better than the 6.9% recorded at the start of this year.
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Morrisons said an improving IT platform was also enabling it to better understand and serve customers, as well as drive cost out of the business.
Overall, profits for the year to February are now expected to be between £335 million and £365 million, compared with its previous forecast of £325 million to £375 million.
David Alexander, a retail analyst at consultancy Conlumino, is sceptical that Morrisons can successfully reverse the downward sales trend through its current plan of action, such as the Match & More loyalty scheme.
He added: “Far from being a game changer, Morrisons’ Match & More scheme misses the point by being precisely the kind of gimmicky, voucher-based operation that caused consumers to cast flirtatious glances at the discounters in the first place.
“Amid all the price-matching and vouchering of the Big Four, the discounters are succeeding by keeping things simple.”
The update from Morrisons came as Danish-based discount supermarket Netto marked its return to the UK with the opening of its first store under a partnership with Sainsbury’s.
The site, at Moor Allerton, in Leeds, will be followed by another 14 over the next year as part of a trial scheme funded by Netto owner Dansk Supermarked and Sainsbury’s.
Netto left the UK market five years ago when it sold its 198 stores to Asda. The new stores will sell 2,000 products, similar to German discounters Aldl and Lidl, and up from the figure stocked at the time of Netto’s sale.
For Sainsbury’s, the move allows it to enter the fast-growing discount sector, worth an estimated £10billion a year, without diluting the reputation it has built up at its supermarkets, convenience stores and online.
There are nearly 1,300 Netto stores across Denmark, Sweden, Poland and Germany. Other store openings planned for the UK this month include at Manchester, Sheffield, Ormskirk and Doncaster.
New ranges have been specially created for the UK stores under own-label brands “Premieur” at the top end and “Easy” for everyday items. Every store will have an in-house bakery offering fresh Danish breads and traditional Danish pastries.
Sainsbury’s chief executive Mike Coupe said the store venture would bring some “much-needed Scandinavian flair to the UK discount market”.
He said: “We’ll, of course, be following this trial closely and supporting Netto’s discounter expertise with Sainsbury’s unique understanding of the UK customer.”