Bargain hunt supermarket customers lift profits at Morrisons

MORRISONS beat market expectations with an 8.4 per cent rise in year-end profits as record numbers of bargain-hungry shoppers poured through the doors of the supermarket chain’s 475 UK stores.

Chief executive Dalton Philips declared it the group’s “best year yet”, with pre-tax profits of £947 million during the 12 months to 29 January. The UK’s fourth-largest chain opened 34 new stores during the year to boost the number of customers by 400,000 to 11.4m per week.

Like-for-like growth, which excludes VAT and fuel sales, doubled to 1.8 per cent against the previous year.

However, that rate slowed to just 0.7 per cent in the fourth quarter, which covers the critical festive period. The strain on consumers’ finances has knocked other supermarket groups as well – in January, market leader Tesco was forced to issue its first profit warning for 20 years after poor Christmas trading.

Asda, Sainsbury’s and Tesco have all been looking at ways of sprucing up their offerings in fresh food, which has been rising in popularity among shoppers. Morrisons declared yesterday that it was prepared to take on its rivals as it pushes ahead with the roll-out of its new format stores.

The fresh layout, trialled last year in 12 stores, cuts back on space for processed foods to make way for 350 additional fruit and vegetables. The work of bakers, fishmongers and butchers is also within customers’ view.

Deli sales across the revamped stores rose by more than 40 per cent last year, while produce sales were up 14 per cent.

“This will be a differentiator, this is game-changing stuff,” Philips said.

“We’ll have 15 per cent of our sales going through these new fresh formats by the end of the first half. It’s almost impossible to replicate.”

It will cost the company about £1.7m per store to launch the fresh food concept. Two of the group’s 57 Scottish outlets – Portobello Road in Edinburgh and Barrack Street in Glasgow – have already been overhauled.

Morrisons will roll-out its “M Local” convenience stores from three test sites to 20 this year, and to 70 by the end of 2013. Philips refused to rule out expansion through acquisitions.

Philips conceded that the coming 12 months would be tough, with fierce competition across the sector for customers who are increasingly sticking to stringent budgets.

“We know that 2012 will be tough, and we will be working hard to deliver even better value,” he said. “At the same time, we have ambitious plans for the long-term development of the business, through new supermarkets, convenience stores and the development of our multi-channel capabilities.”

A final dividend of 7.53p makes gives a total for the year of 10.7p, up 11 per cent. Shares closed 4.9p higher yesterday at 289.7p.