Sales at converted Safeway stores jump 9% but others suffer slump

Published on Wednesday 11 January 2006 12:03

MORRISONS, Britain's fourth-biggest supermarket chain, today revealed figures that showed its £3 billion acquisition of Safeway was finally paying off.

Figures for the group's crucial Christmas trading period covering the six weeks to January 8 showed like-for-like sales, excluding fuel, were up by 2.8 per cent, which was slightly ahead of City expectations.

But the initial problems with the 2004 takeover of Safeway, which was fully integrated into the group in November, appear to have been overcome with like-for-like sales at the 220 converted stores up by nine per cent. And converted stores which have been operating for more than a full year recorded a 5.7 per cent improvement.

However, the 122 original Morrisons outlets were where trading weakness showed up, with a 2.9 per cent decline in sales.

And overall, total sales for the period were down by 8.1 per cent, which the firm said reflected the sale of some 155 stores - including two in Edinburgh to rival Somerfield - to meet competition rules following the Safeway deal.

But despite the festive fillip, the group, headed by chairman Sir Ken Morrison, stuck by previous profit forecasts for the full year. In October, the Bradford-based firm said annual earnings would be at the bottom end of its targeted range of 50 million to 150m.

Over the first half, Morrisons booked a bottom line pre-tax loss of 73.3m, compared with a profit of 121.6m in the same period the year before. In a statement, the company said: "The directors believe the profit outturn for the year to 29 January 2006 will be in line with previous guidance."

Full-year results are expected on March 23, along with further details of the group's "optimisation plan".

Yesterday, Morrisons announced the axing of around 1600 jobs through the closure of two distribution centres in Kent and Bristol. Today it said costs relating to the redundancies and sale of the buildings were expected to be about 60m.

Meanwhile, edge-of-town retailer Matalan revealed gloomier festive fortunes when it said like-for-like sales over the ten week period to January 7, based on 167 stores, were down by 5.5 per cent. However, that compares with a 10.6 per cent drop for the nine weeks to October 29.

The Lancashire-based company, which has two outlets in Edinburgh, blamed a decision to cut back on the number of reduced-price garments on its shelves for the slide. Matalan said home and Christmas gifts had "performed poorly", but sales of non-reduced clothing had risen by 0.3 per cent over the same period on a like-for-like basis.

The contrasting fortunes between the two retailers came as the latest consumer confidence barometer from the Nationwide revealed that optimism fell during December to the lowest level recorded since Nationwide began doing the research in May 2004.

Stuart Bernau, Nationwide's executive director, said: "The gloomy view among consumers is perhaps not surprising given that over the last 12 months GDP has almost halved. It also suggests that people may have re-appraised their situation and become more realistic about the future."