• Net profit slides 6%
  • Underlying profit before tax down 4%
  • Like-for-like sales fall 2.1%
Morrisons said sustained pressure on consumer spending was reflected in its sales performance

Morrisons said sustained pressure on consumer spending was reflected in its sales performance

UK grocer Morrisons has booked a drop in full-year profits, admitting its results fell short of expectations.

The supermarket group said this morning (14 March) that net profits were down 6% to GBP647m (US$966m) for the year ended 3 February as it admitted it had struggled to grow last year in a difficult consumer market.

Operating profit in the period amounted to GBP949m, down from GBP973m last year, while underlying profit before tax was down 4% to GBP901m.

The grocer said sustained pressure on consumer spending was reflected in its sales performance, with like-for-likes down 2.1%. Morrisons, which this morning announced a potential online food tie-up with Ocado, generated total sales of GBP18.1bn, up 3% on last year.

The grocer said its "below market" sales performance was "disappointing", and that it had not done enough to communicate its promotions and value message lacked a meaningful presence in the two fastest growing sectors of the market: online and convenience.

CEO Dalton Philips said: "The sustained pressure on consumer spending was reflected in our like-for-like sales performance, which was not as good as it should have been. We have implemented a range of measures to address this and are making good progress in improving our promotional effectiveness and in communicating our points of difference."

Show the press release

 

PRELIMINARY RESULTS FOR THE YEAR

ENDED 3 FEBRUARY 2013

 

Good strategic progress in a tough trading year

Financial summary

·         Turnover up 3% to £18.1bn (2011/12: £17.7bn)

·         Like-for-like sales (ex-fuel, ex-VAT) down 2.1%(1) (2011/12: up 1.8%)

·         Underlying profit before tax down 4% to £901m (2011/12: £935m)(2)

·         Profit before tax £879m (2011/12: £947m)

·         Earnings per share 26.7p (2011/12: 26.7p)

·         Underlying earnings per share up 7% to 27.3p (2011/12: 25.6p)

·         Total dividend for the year up 10% to 11.8p (2011/12: 10.7p) – dividend cover of 2.3 times (2011/12: 2.4 times)

·         Net debt £2,181m (2011/12: £1,471m) after capital investment of £1,016m (2011/12: £901m)

·         Equity retirement £579m in the year(3), (2011/12: £368m).  Programme now completed

Strategic highlights

 

·         Fresh Formats –  tailored fresh food proposition now in over 100 stores – and continuing to perform to plan: programme to expand in 2013/14

·         Vertical integration – good progress on expanding manufacturing capability;  Winsford fresh meat facility and fresh seafood site in Grimsby operational and performing well

·         Catalina voucher at till system implemented in all stores

·         Convenience  first 12 M local convenience stores performing well; first stores in London now open; accelerated target established for 2013/14; West London convenience distribution centre (CDC) open; additional CDC to support expansion in the North of England

·         Multi-channel – Morrisons Cellar successfully launched; three new Kiddicare stores opened; Online – Morrisons first online food operation to launch in  2014

Operating highlights

·         17 new supermarkets opened (4) 

·         5,000 own brand products successfully launched; M savers the fastest growing own label value brand (5) – sales up 37%

·         4% productivity improvements in stores and distribution

·         IT systems replacement programme on track – providing foundation for accelerated cost savings in 2013/14

·         Financial discipline maintained through rephasing of planned investment in new stores: £200m reduction in capital expenditure 

·         Grocer of the Year and Employer of the Year (6)

Commenting on the results, Sir Ian Gibson, Chairman, said:

“Although this has been a difficult year in trading terms for Morrisons as we struggled to grow sales in a tough consumer environment, we have delivered a 7% improvement in underlying earnings per share and announced a 10% dividend increase, in line with our previously stated policy.  It has also been a period of significant strategic progress as we continue to lay the foundations for future growth”.

Dalton Philips, Chief Executive, said:

“The sustained pressure on consumer spending was reflected in our like-for-like sales performance, which was not as good as it should have been. We have implemented a range of measures to address this and are making good progress in improving our promotional effectiveness and in communicating our points of difference. Recent events have underlined why it’s so important that we tell our customers how and why we’re different and what our vertical integration really means for them. Food quality, provenance and the issue of trust are at the forefront of consumers’ minds and these are all areas where Morrisons has something genuinely different to offer.

We continue to invest for the long term success of our business. Our Fresh Format offer is now in over 100 stores nationwide and we will continue to tailor the concept as we expand the rollout during the coming year. We are ready to accelerate the development of our multi-channel presence and our convenience operation is gaining real momentum acquiring over 60 new sites in recent weeks alone. We are therefore increasing our target for store openings in the coming year by 40% and now plan to have 100 stores trading by the end of the year.      

Today’s announcement that we are launching an online food offer in 2014 is another important step in Morrisons strategy of being ‘Different and Better than Ever’.  We may be a late entrant to the online food market but we have learnt from our involvement with Kiddicare and Fresh Direct. We have long been a leader in fresh food and our craft skills and vertical integration really set us apart from the competition. Ensuring that these points of difference translate into our online food offer will be a priority.” 

Outlook

We will continue to implement a wide range of measures to address the sales performance of the business and progress our strategic initiatives, in order to provide a platform for successful long term growth. Our expectations are that   the challenging consumer and market environment we saw in 2012 will persist through the coming year

 

Original source: Morrisons