Morrison H1 results show signs of recovery and beats expectations

By Erin Smith

Published: 15 September, 2016

Morrisons Supermarkets Plc first half of the year results are showing signs of recovery under the new leadership team and beat analysts expectations.

First half of the year results show like-for-like sales up 1.4% (excluding fuel and VAT) and second quarter sales increased 2%. That is the third consecutive quarter of positive results for the retailer, which has been hit hard by the grocery price wars and has lost marketshare to discounters.

Underlying profit increased 11.3% to £157m for the first half the year ending 31 July 2016. Further cost savings are expected to exceed the £1bn target by the end of 2016/17 and the £2bn free cash flow target was met six months ahead of schedule.

David Potts, an ex-Tesco director named as Morrisons chief executive officer in February 2015, said: "We are pleased with positive like-for-like sales and 11% underlying profit growth in the first half. Our priorities are unchanged."

Morrisons chairman, Andrew Higginson, said: "We remain on track to deliver improved profits and returns for shareholders."

Connor Campbell, a senior market analyst at www.spreadex.com said:

"One of the big four that looked like it was in trouble last year has come out swinging and is fighting back against their rivals. Morrisons new management team have done exceptionally well to roll out a recovery strategy that's been bold, fierce and affective."

The lower price strategy the retailer has embarked on as well as making improvements to the customer experience has been paying off.

"By overhauling their online offering while still keeping prices low the chain looks like they might just get out of this battle bruised but buoyant. Consumers are ultimately in control - as long as they continue to vote with their feet the big four are going to have to keep prices low to keep the trollies rolling in," said Campbell.

The uncertainty of the impact of Brexit has yet to be seen, but should the sterling remain under pressure food prices could start to rise, according to statement in the half yearly report.

"We have seen no negative impact on customer sentiment or customer behaviour. There are some uncertainties, especially around the impact on imported food prices if sterling stays at its current level. However, our priorities are unchanged, and we will continue to invest in becoming more competitive and improving the shipping trip for customers."

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