Consumers’ fears fail to put a dent in Morrisons’ performance

morrisons, the UK’s fourth-biggest supermarket, posted resilient interim profits in the teeth of the economic downturn yesterday as its chief executive warned consumer confidence was “at a generational low”.

Dalton Philips said: “A third of our customers are saying they are getting to the end of the month and saying they literally have nothing left over, so they are having to change the way they shop.”

He said shoppers were buying more with cash, with credit card transactions down 8 per cent, checking prices online and sharing bulk purchases with friends.

Claiming that for many consumers 2011 felt like a deep recession rather than gradual recovery, the Morrisons boss said: “Consumer confidence is probably as low as it has ever been.”

Despite the economic pressures, Morrisons struck a pre‑tax profit of £449 million in the six months to end‑July, up 9 per cent on the £412m in the same period of 2010.

Group sales rose 7 per cent to £8.7 billion, with same‑floorspace sales up 2.2 per cent, compared with 2.5 per cent in the first trading quarter. The interim dividend lifts 10 per cent to 3.17p (1.23p), paid on 7 November.

Philips revealed the progress the company had made in developing an online and convenience store business, where it is seen as badly lagging rivals such as Tesco and Asda.

The group said it had so far opened two “Morrisons local” pilot convenience stores in England, and planned to open up to half a dozen this financial year.

Dalton said there were no plans to open a pilot north of the Border “at the moment. Not for any specific reason. There’s lots of opportunities in Scotland”. Morrisons is the third-biggest supermarket play in Scotland, with 56 stores and a 15 per cent market share.

Meanwhile, Dalton said that Morrisons hoped to launch non‑food online in the 2012-13 financial year, with an internet food offering in 2013-14.

The company has made senior appointments in the online division, while buying the Kiddicare childrenswear internet business and taking a stake in freshdirect, a profitable New York‑based online food retailer.

Dalton said virtually all the food retailing industry’s online food businesses were currently unprofitable, adding: “I think we will have a distinct advantage by coming in late [to the online channel]. Being late is not a problem. You need to do it right when you do it.”

Andrew Porteous, food retailing guru at Evolution Securities, said of Morrisons yesterday: “This is a good set of results in a difficult environment.”

Shares in the group closed up 12.2p, or 4.2 per cent, at 301.6p. The stock has outperformed the Stoxx Europe 600 retail index by 28 per cent this year. Morrisons revealed it planned to hire an extra 6,000 staff this year, on top of the 130,000 people it already has at about 450 UK stores.

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