Morrisons posts gloomy news on sales and profits but is hint of silver lining, says Kantar Retail

Morrisons: investing in core supermarket chain to lower prices

Morrisons: sales and profits fall but uptick in online

Morrisons has reported a near 30% fall in half year profits and a decline in like-for-like sales.

Pre-tax profits for the six months to 3 August 2014 fell to £239m from £344m a year earlier. Like-for-like sales, excluding fuel, fell 7.4% in the period.

Sir Ian Gibson, non-executive chairman, admitted conditions were tough, and said the industry is going through “unprecedented change”.

“Our first-half results reflect the reset of the business we announced in March. Morrisons is now well underway with building the foundations for a better future,” Sir Ian said.

Morrisons launched its three-year turnaround plan in March, investing £1bn in lowering prices and improving its food range.

Dalton Philips, chief executive, said: “We are six months into the three-year plan that we set out in March and, although it is early days, I am encouraged by the progress we have made.

“There is an enormous amount of change and modernisation flowing through our core business, much of it enabled by new systems. Price investment, in-store improvements, and better products were all key components of the work undertaken in the first half, and the Morrisons card launches soon. Our new growth channels – online and convenience – are progressing well, and our cost-savings and cash flow plans are both on track to achieve our ambitious three-year targets.

“Although it is too early to see the benefits of the three-year plan in the sales line, Morrisons is getting back on the front foot, and implementing change and innovation at real pace throughout the business. We are meeting the challenges of structural change with decisive action and are on track to become a more distinctive value retailer for the next generation of grocery retail.”

Online shopping, launched earlier this year, contributed 0.4% to overall sales in the six months to 3 August 2014.

Commenting on the results, Bryan Roberts, retail insights director EMEA, Kantar Retail, said: “Morrisons has provided some unsurprisingly gloomy news on like-for-like sales and profitability, but the reportedly decent progress in online, the welcome news to preserve the dividend and recent Kantar Worldpanel data all hint at a glimmer of silver lining.

“Renewed clarity on pricing and the return of some impactful promotions have sharpened the proposition and we have been heartened by what we have found on recent store visits.

“That said, we have been moderately alarmed by what we perceive to be fairly quiet footfall in some stores, reaffirming to us that Morrisons needs to stop hiding its lamp under a bushel and roll out a consistent and sustained marketing campaign that educates both lapsed shoppers and potential new shoppers into what they might find in-store.”

Karl McKeever, founder of Visual Thinking, a retail consultancy specialising in visual merchandising, said: “That illusive in-store magic continues to evade Morrisons. It’s not that it’s a bad retailer – even though it’s been hemorrhaging customers, market share and, crucially, sales.

“Compared to competitors, Morrisons looks dull, ordinary, and its format tired. Stalling with its online and convenience offer has been well documented, along with the decision to shun the loyalty cards that brought Tesco and Sainsbury’s closer to customers.

“Morrisons lacks clear purpose and its general merchandise offer is lackluster. The brand urgently needs a major re-think, to fundamentally work out what it wants to be and, more importantly, to do something bold, original and new.”