Morrisons back in black but warns of '˜zig-zag' recovery

Supermarket group Morrisons has returned to the black after unveiling its first quarterly sales growth for four years.

Morrisons faces a 'zig-zag' path to recovery. Picture: John Giles/PA

But chief executive David Potts tempered any excess optimism by warning yesterday that a turnaround of Scotland’s third biggest supermarket business will take time as the big four players are caught up in a deflationary environment and continuing incursions from the sector’s discounters.

“It’s a bit of a mug’s game for a CEO to forecast sales growth because it’s very competitive. Because we are in a turnaround and I’ve always said it’s not going to be a straight line, it will zig-zag around,” Potts said.

Morrisons, which has about 60 Scottish stores, reported a pre-tax profit of £217 million in the year to the end of January in line with forecasts.

That followed a £792m loss a year ago after the company made large writedowns across the value of its store estate shortly after Potts’s predecessor, Dalton Philips, was ousted.

Yesterday Morrisons posted a 0.1 per cent rise in like-for-like sales for the fourth quarter of the year, its first quarterly rise since 2012. Across the year it said same-store sales declined 2 per cent, compared with a fall of 5.9 per cent in 2014.

Underlying profit – stripping out one-off items – fell to £242m from £345m a year ago, after closing 21 unprofitable supermarkets and selling off 140 M local convenience outlets for £25m to turnaround specialist Greybull Capital.

Last month Morrisons surprised the supermarket sector by signing a deal with US online giant Amazon to supply fresh food to its customers.

Amazon will sell hundreds of Morrisons’ products through its food delivery service Amazon Pantry and its subscriber service Amazon Prime Now. Morrisons also cut the cost of more than 1,000 products in February, slashing the price of staples such as fruit and vegetables by about 19 per cent.

Last year the company also axed around 700 jobs at its Bradford HQ to cut costs. The moves saw the chain elected this month to re-enter the FTSE 100 Index of the country’s biggest firms, after being forced out three months earlier.

Potts said there was “a great deal more to do”. He added: “By improving the shopping trip for customers, we have started the journey to turn around the business and make our supermarkets strong.”

He added that he had targeted £1.1 billion of property disposals over three years. Steve Clayton, head of equity research at broker Hargreaves Lansdown, said: “Morrisons is still a work in progress, but the company appears to be heading in the right direction.”