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Morrisons sales slump but supermarket sees 'progress'

Published:  06 November, 2014

Morrisons' saw a sharp drop off in sales in the last three months, but insisted it had "made progress" on its strategy, and needed more time to see the results.

The supermarket's like-for-like sales fell 6.3% in the 13 weeks to November 2, in line with analysts' expectations. However shares in the supermarket rose 5.5% in early trading.

MorrisonsMorrisons’ LFL sales have fallen 6.3% in the lsat three monthsBut the retailer is bullish that it has ‘made progress’, and has made a series of changes to its BWS department in the past year.

The group, which operates over 500 stores in the UK, opened 12 new M local stores and three new core stores, plus one replacement, in the last three months, and says it is on schedule to meet its target of opening 60-70 new M local stores by the year end.

Chief executive Dalton Philips, said: "Morrisons is meeting the challenges created by a period of intense industry competition and structural change with quick and decisive action. I am encouraged by the further progress we have made, especially on a number of key operational measures, cash flow and costs."

He singled out the Match & More scheme as a "big move" for the retailer, saying "we are the only supermarket that is price matching the discounters". While broadly welcomed by shoppers, the scheme has faced criticism over its complexity, with Planet Retail global research director Natalie Berg describing it as a "slippery slope". Lidl took a full page ad in the Sun newspaper with the headline "Morrisons have found a way to match Lidl's prices" followed by an asterisk, and a 28-point list written in tone and length to suggest the only way Morrisons can match Lidl is with a convoluted scheme.  

Moody's has said that Morrisons has a "slightly better risk profile than Tesco" and a "decisive strategy of narrowing the price gap with the discounters", on the plus side. Langton Capital analysts said its store estate is also a strength, with 90% of its stores being under 40,000 sq ft, compared to 56% of Tesco outlets being over 50,000 sq ft. It also owns 90% of its stores, while rival Tesco owns less than 60% - meaning its rent obligations are just £862 million versus £11.3 billion at Tesco.

The group said it was confident that it would generate £2 billion of cash and £1 billion of costs savings over three years, adding that it was "making good progress on all components of the plan we set out in March".

It said it expects underlying profit before tax for the full year to be in the narrower range of £335 million to 365 million, as opposed to £325 million to £375 million.

In May the company made a series of changes to its online business, including scrapping its standalone wine site Morrisons Cellar. The online wine business, now part of the total grocery site, delivers chilled wine direct to consumers' doors and offers deliveries within one-hour specified time slots.

Other major changes to wine included, in the last year, the launch of own brand Signature and Chalkboard wines, with Chalkboard designed to sell at under £5. The Chalkboard Pinot Grigio sells around 18,000 bottles per week, at £3.99. It also moved much of its own brand packing to Accolade Park in Bristol.

It also now offers a convenience store wine range that is bespoke to each store "based on certain different demographics".