Falling sales prompt Morrisons to cut back on expansion

The group yesterday posted a 0.9 per cent fall in like-for-like sales but said its underlying pre-tax profits had edged up to £445 million from £442m a year earlier. It highlighted Scotland as one of its strongest markets.

Chief executive Dalton Philips said: “It’s going to be tough for the next six months and probably well into next year.”

Referring to recent increases in food prices, he said: “A lot depends on what happens with commodity prices, particularly fuel, and what’s going to happen with the harvests.”

In the face of this uncertainty, the group said it had cut its new space target by 200,000sq ft to 500,000sq ft for the 2012-13 financial year, and by a further 300,000sq ft to 900,000sq ft in 2013-14. The moves will slash capital spending at Morrisons by £200m.

Arch rivals Sainsbury’s and Tesco also both revealed recently that they were reining in their UK expansion in terms of new stores and extensions.

Asked if there was a north/south divide in terms of weak consumer sentiment affecting food shopping, Richard Pennycook, Morrisons’ finance director, said: “We see the picture as more complex than that.

“There are parts of the country where there are challenges, some are doing extremely well. Scotland is a very strong area for us and we continue to perform very well up there.”

The chain moved north of the Border in 2003 with the acquisition of Safeway. It is now Scotland’s third-biggest supermarket group, with nearly 60 stores and a 15 per cent market share. Across the wider group, total first-half sales rose 2.3 per cent to £8.9 billion.

Latest industry data from Kantar Worldpanel showed the company lagging sales growth of Tesco, Asda, Sainsbury’s, and discounters Aldi and Lidl.