Profits at Morrisons offer hope of economic recovery

Published on Thursday 10 September 2009 11:01

SUPERMARKET chain Morrisons today said half-year profits leapt to £449 million as the resurgent supermarket saw further strong growth in sales.

The chain's 45% increase in pre-tax profits came after same-store sales rose by 7.8%, excluding fuel and VAT, in the six months to August 2.

But Morrisons – the first of the major UK-owned supermarkets to report interim figures – cautioned there would be slower market sales growth to come as food price inflation eases back.

Today's interim sales figures show further growth on the 7.3% like-for-like increase reported in the first quarter – figures that left market leader Tesco's 4.3% rise trailing behind.

The UK's fourth biggest supermarket said it was continuing to poach customers from its rivals, adding 1.1 million weekly shoppers over the past two years.

Recent market share data from TNS Worldpanel revealed Morrisons enjoyed the biggest quarterly rise among all the mainstream chains, lifting share to 11.4% in the 12 weeks to August 9.

And Morrisons recently offered more cheer when it said in July that its better-than-expected sales growth was likely to see full-year profits come in ahead of forecasts.

The group said it achieved today's "market-beating" results despite consumer spending conditions remaining tough in the first half of its year.

"The economic downturn continued to weigh heavily on consumers in the period and our strong focus on value was maintained," said the group.

It slashed prices further as competition to attract cash-strapped shoppers ramped up in the sector, saying it offered deeper promotions on fresh food.

Marc Bolland, chief executive of Morrisons, said: "This has been an excellent first-half performance from Morrisons, continuing our run of market beating sales growth."

Chairman Sir Ian Gibson added Morrisons would continue to help shoppers on a low budget.

"Morrisons has gained over one million new customers in the past two years and the management team's priority is to build on this success by continuing to offer outstanding day-to-day value to all our customers as the pressure on consumer spending continues through 2009."

However, supermarkets will have to put more focus on volume of sales as recession continues to ease food price inflation back to levels not seen for two years.

Figures earlier this week from the BRC-Nielsen Shop Price Index showed that food inflation eased for the fifth month in a row in August, to 2.3% – a hefty drop from last summer's high of 10%.