MORRISONS spiralled £792 million into the red last year after Scotland’s third biggest supermarket group was hit by another year of falling sales and took a £1.3 billion writedown on the value of its stores.
The group, which has a 13 per cent grocery market share north of the Border, revealed that excluding one-off items pre-tax profits slumped 52 per cent to £345m – its worst result in eight years.
Despite the £1bn of price cuts unveiled by former chief executive Dalton Philips last spring, same-store sales fell 5.9 per cent in the year to 1 February. The decline moderated to 2.6 per cent in the final quarter that took in Christmas.
Morrisons’ further red ink comes as new chief executive David Potts, who had more than 40 years’ retailing experience at Tesco, succeeds the ousted Philips on Monday.
The Bradford-based retailer, which expanded rapidly in Scotland under Sir Ken Morrison through its acquisition of Safeway in 2004, also announced it is to close 23 under-performing outlets in its current 153-strong MLocal convenience store chain.
Philips had been criticised during his five-year tenure for a perceived late entry into the two main growth drivers in the supermarket sector, convenience stores and online.
But Andrew Higginson, group chairman and another former Tesco veteran, said yesterday of the belated MLocal expansion: “Candidly, we got off to a slower start than we hoped. It doesn’t make any sense at the moment to press on with something that isn’t working as well as we hoped.”
The MLocal closures will lead to 380 redundancies this year, Morrisons said. Amid the continuing pressures, the group lifted the full-year dividend 5 per cent to to 13.7p.
But the board limited its divi commitment for this year to paying “not less than 5p a share”.Higginson said: “All the options (for the 2015-2016 financial year) were on the table, but there was no serious risk (of no dividend).
“We’trying to take a balanced view so that David (Potts) will have enough money to work with when he arrives.”
Higginson said that the retailer expected no change from the tough food retailing trading environment in the year to come.
But he added: “The fundamental business is a good business and it’s been allowed to drift a bit of late.”
On the property writedown, the chairman said: “This has been a controlled and planned reset of the business – it is painful, but it is the start of a new growth period we hope.”
Stockbroker Jefferies said in a note: “Morrisons remains our favoured UK grocer given clearly improving trading momentum and pricing position.” The company’s shares closed up 1.1p at 207.6p.
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