Morrisons has claimed its three-year turnaround plan is working after sales declines slowed and its new Match and More loyalty card proved popular with customers.
The Bradford-based supermarket chain reported a 6.3% drop in like-for-like sale in its third quarter, down from the 7.4% fall seen in the six months to 3 August. Profits slumped 51% to £181m in the first half, underlining the challenge the Morrisons boss, Dalton Philips, faces.
The company said: “It will take time for our initiatives to fully benefit our sales performance.”
Shares in Morrisons rose 5% in early trading.
As the supermarket price war escalated, Morrisons slashed prices on 1,200 products by an average 17% in May. It spent £135m on price cuts and improving products in the first half and has £165m to splash out on the all-important runup to Christmas.
The chain said its Match and More card, whose launch in October was hailed as a “big move” by Philips, was proving “extremely popular” with customers. It is the first of the big grocers to pledge to match the price of discounters Aldi and Lidl, as well as Tesco, Sainsbury’s and Asda on branded and own-label goods. Philips said Morrisons’ prices were already the same as Aldi and Lidl on many branded items.
He said on Thursday he was “encouraged by the further progress we have made, especially on a number of key operational measures, cash flow and costs”. The items-per-basket measure continued to improve and was down only 2.4% year-on-year, compared with a low of 6.9% hit in the fourth quarter of last year.
The chain has opened 12 M local stores and is on track to meet its target of opening 60-70 convenience stores by the end of the year. It also opened an online hub in Greater Manchester.
Morrisons is paying down its borrowings faster than expected and expects to cut its debt pile to £2.3bn to £2.4bn by year end, from £2.6bn currently.
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “While it is too early to say whether Morrisons’ throwing down the gauntlet to the discounters will succeed, the current picture is one of a beleaguered supermarket within a tough sector.
“There are some indications of progress – the financial stability mentioned at the interims seems to have been maintained given the group’s capital discipline, the Match and More scheme is a clear statement of intent, and the roll out of convenience stores remains on track. However, Morrisons is still a ‘jam tomorrow’ stock, in the midst of a three-year plan which aims to eliminate the current loss of sales, market share and inevitably, therefore, profit.”
