National: Supermarket group Morrisons sticks to forecasts despite fall in sales
SUPERMARKET group Morrisons posted its first decline in sales in nearly a decade today after it refused to square up to rivals with promotions “at any cost”.
The UK’s fourth biggest grocer, which has 455 stores in the UK, saw same-store sales excluding fuel and VAT decline 1% in the 13 weeks to April 29, compared to 1.8% growth in the whole of last year. City analysts had expected a marginal rise in sales.
Morrisons has not recorded a drop in like-for-like sales since its difficult acquisition of Safeway in 2004, which led to a series of profit warnings.
The group, which saw its market share dip to 11.9% in the 12 weeks to April 15, from 12.1% in the previous year, said the high cost of oil and other commodities continued to hit households.
But chief executive Dalton Philips said the grocer was not prepared to “pursue small market share gains at any costs” as rivals roll out discounts and special offers.
However, Morrisons, which recorded a better-than-expected 8% rise in underlying pre-tax profits to �935 million last year, said its outlook for the year was unchanged.
The group said it was still in line to meet full-year expectations of pre-tax profits of between �960 million and �970 million.
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Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “Morrisons continues to underwhelm in the face of tough trading conditions.”
He added: “Morrisons’ market share has been inching in the wrong direction according to the latest industry surveys, with its perceived value offerings coming under pressure from discount rivals.”
Morrisons, which has seen its shares slide 17% in the last six months, has seen sales slowdown as Tesco unveiled its Big Price Drop, Asda pledged to be 10% cheaper than rivals and Sainsbury’s launched its brand-match scheme.
The group previously pledged to roll out smaller convenience formats throughout 2012 after the successful trial of three stores last year, but only opened two stores in the period.
Meanwhile, there was still no movement on plans to sell online, which are not expected to be revealed until the end of the current financial year.
The group did not provide any further detail on the acquisition of 10 former BestBuy stores, which it plans to open under its Kiddicare brand.
Philip Dorgan, analyst at brokers Panmure Gordon, said the supermarket “has a lot to do in order to achieve its 2016 vision”.
He said: “As yet, it has only a very small convenience store chain, a few revamped stores, only a toehold online in non food and no presence online in food in the UK.”