Morrisons believes consumers worse off than 2008/9

Morrisons believes consumers worse off than 2008/9

Senior Morrisons executives have expressed caution about the prospects for UK food retailers in 2012.

The UK's fourth-largest grocer today (9 January) reported its sales results for the final weeks of 2011 and said low consumer confidence would persist this year, putting pressure on its business and on its competitors.

"With consumer confidence at a generational low, you're going to a sector that has very low like-for-likes," chief executive Dalton Philips said. "You've got to see a sector that's in the 1-2% [growth range]. I don't see it as being much higher than that."

Philips was speaking after Morrisons was the first of four UK food retailers due to announce how they fared over the Christmas period. Morrisons reported a 0.7% increase in like-for-like sales for the six weeks to 1 January, indicating that sales growth at the company had slowed. In the 13 weeks to 30 October, the third quarter of Morrisons' financial year, its sales increased 2.4%.

The Morrisons chief insisted he was "very pleased" with the company's performance in a "very tough" market and claimed the retailer had attracted 800,000 more customers during the period, an increase of 4.8% on a like-for-like basis. He said the increased number of customers reflected that Morrisons remained on the right track. "Our sales growth is a good solid number, a consensus number. Eight hundred thousand customers is a lot more; we are clearly doing something right," he said.

Philips said the muted like-for-like sales growth was due to consumers putting fewer items in their baskets when they did their Christmas shop and what they did buy reflected a search for value. Pork sales, for example, jumped as consumers looked to supplement the turkey joints they bought with a cheaper protein, Philips said.

Consumer confidence continued to be "very low" in December, Philips said, pointing to GfK/NOP data that showed sentiment last month was at its third-lowest level since the survey was introduced 33 years ago. One of those occasions was in eight months during the "trough" of the 2008/2009 recession, he said.

However, in November 2008, Morrisons reported an 8.1% jump in third-quarter like-for-like sales. In January 2009, the retailer posted an 8.2% rise in like-for-likes during the six weeks to 4 January.

Philips insisted it was "difficult" to compare like-for-like sales in different years due to the base the figures are measured from. "Over the last five years, our sales have grown at over 40% over the Christmas period. You've got to a look at where we were coming from and we are now at a different point than we were in 2008. We've been growing ahead of the market all year and we've been happy with this performance. It's very difficult to compare one like-for-like with another like-for-like. It's the base you're coming off," he told just-food.

Finance director Richard Pennycook insisted times had been tougher for consumers in 2011 than in 2008 and 2009.

"It really is harder for our customers. Disposable incomes are down. Back in 2008 and 2009, confidence took a real knock because of the banking crisis but ironically actually disposable incomes carried on going up. In reality, people were [then] not worse off than they were in 2011," he added.

Looking ahead, Pennycook said the outlook for the sector in 2012 suggested the challenging trading conditions seen in 2011 would continue. "We've talked consistently through 2011 about how hard it was for our customers. As we roll into 2012, we think it will be more of the same. The hope is that some of those inflationary pressures start to ease off a bit but we're not anticipating a return to high growth in 2012."