SALES falls at Morrisons have worsened, highlighting the challenges facing a grocery giant that has failed to post positive underlying sales since the final quarter of its 2011-12 financial year.
Scotland’s third-biggest supermarket business said yesterday that same-floorspace sales slid 2.6 per cent in its third trading quarter to 1 November. That compared with a 2.4 per cent drop in the previous three months.
Morrisons, which has a 13 per cent market share north of the Border, partly blamed a decision to wind down its use of money‑off vouchers, and continuing deflation in the sector. It said overall prices fell 2.2 per cent in the quarter.
On the cutback in promotional vouchers, chief executive David Potts said: “Retailers have always considered reaching for vouchers when trade’s a bit sticky because they tend to give you a shot in the arm.”
But Potts, who replaced the ousted Dalton Philips in March, added that the use of vouchers had “always been considered to be slightly more promiscuous trade than the underlying shopping trip improvements you can make around loyalty”.
Despite the fresh sales setback, Potts claimed his turnaround plan for Morrisons was working, citing positive shopper reaction to more targeted promotions, improved stores and moves to tailor the offering at stores to local communities.
In September, the group announced the closure of 11 supermarkets, putting 900 jobs at risk, as it reported a 47 per cent plunge in half-year profits.
It has also recently agreed the sale of 140 M local convenience stores to focus on its bigger supermarkets, about 60 of which are north of the Border.
Some analysts voiced scepticism about the strength and sustainability of the targeted turnaround at the group. John Ibbotson, of retail consultants Retail Vision, said: “To claim you are making good progress on the back of these numbers is bordering on the delusional.”
Richard Hunter, head of equities at broker Hargreaves Lansdown, said the market consensus of Morrisons’ shares as a “sell” was likely to remain.
He said the group was cash‑generative and had freed up more capital by slashing its dividend, but added “even so, the supermarket sector is a notoriously competitive industry and others will not wait whilst Morrisons continues on its slow recovery.
“In particular, the current perceived wisdom of supermarkets moving towards convenience stores and online are not areas in which Morrisons has any notable strength”.
Philips was ousted 12 months after he announced a three‑year programme to cut prices. By contrast, Potts, an ex‑Tesco veteran, has put the focus on improving products and service levels, and sharpening prices.
Last weekend Morrisons announced it was to launch freshly made sandwiches in store, using ingredients from the supermarket group’s “Market Street” sections.