Morrisons reveals profits slump as price war looms

Morrisons Chief Executive Dalton Philips dealing with a drop in sales. Picture: Carl Court/AFP/Getty Images
Morrisons Chief Executive Dalton Philips dealing with a drop in sales. Picture: Carl Court/AFP/Getty Images
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MORRISONS will reveal a slide in profits this week after a dismal year for the supermarket as it also faces up to the threat of a full-scale price war among the “big four” players.

The chain, headed by chief executive Dalton Philips, warned over profits after a hefty 5.6 per cent drop in underlying sales over the key Christmas period – a performance described as “quite awful” by one retail expert.

It admitted its festive sales were “disappointing” but joined rivals in blaming tough market conditions.

Larger rivals Tesco and Asda are now leading an aggressive price-cutting programme to halt the exodus of customers to the likes of discount chains Aldi and Lidl.

Tesco unveiled plans for £200 million of price cuts last week and said it would open 150 convenience stores a year under plans to halt falling UK sales.

Asda, the UK’s second biggest supermarket behind ­Tesco, is also launching a fight-back after seeing sales flat-line, recently pledging to spend £200m on price cuts and £750m in store revamps and new openings this year.

There are fears that profit margins, which are already under pressure at Morrisons, could be hit further if it tries to compete in a price war.

Analysts at Deutsche Bank are forecasting a 13 per cent slump in underlying annual pre-tax profits to £787m after Morrisons warned results would come in towards the bottom end of a £783m and £853m range.

But there are some positives for the group, with its recent launch of a long-awaited online grocery service, while it is also rapidly expanding its convenience store network. It will no doubt be pressed on early take-up of the online service, launched on January 10 in conjunction with Ocado, which has signed a 25-year deal to handle technology and operations, including delivering groceries through a Morrisons-liveried fleet.

Recent reports suggest Morrisons’ founding family has sounded out private ­equity funds to assess their interest in taking the supermarket private.