The chief executive of Morrisons has insisted that the supermarket is “making good progress in many areas”, despite reporting a third-quarter sales fall of 2.6%.
In the 13 weeks to 1 November, the company’s total sales excluding fuel were down 2% while like-for-like sales were down 2.6%. As it continues to invest in lower prices, a reduction in the number of vouchers impact year-on-year third-quarter sales by 2.4%.
The news has been announced shortly after it was revealed that Morrisons had decided to sell 11 supermarkets and 140 unprofitable convenience stores, in a deal worth about £25m.
David Potts, who replaced Dalton Phillips as chief executive of the troubled supermarket chain in Feburary, said: “The business is moving at pace on the long journey towards improving the shopping trip for customers. Our priorities for the rest of the year are unchanged – to stabilise trading, reduce costs and further improve the capability of the leadership team. We are making good progress in many areas and customers are noticing improvements.”
The retailer added that it expects underlying profit before tax to be higher in the second half of 2015/2016 than the first.
David Gray, retail analyst for Planet Retail, said today’s figures were indicative of limited progress in terms of topline like-for-like performance.
Gray said: “As expected, the numbers this morning indicate limited progress with like-for-like declines coming in on a par with the previous quarter – although against tougher comps. The result also puts Morrisons behind key competitors – Sainsbury’s holding its own, Tesco making progress at home.
“Even so, credit must be given to Morrisons’ new management under David Potts for taking some tough but necessary decisions to protect the long-term profitability of the business – exiting convenience and the price comparison loyalty scheme, Match & More. Both initiatives were a major cost and their removal will allow the chain to invest in the core proposition, hypermarkets and superstores. This after all is where Morrisons makes the vast majority of its sales and profits.
“Even though convenience remains the UK’s second fastest growing bricks and mortar channel it is by no means a golden ticket to success, and new management’s recognition of this can only be seen as a blessing. Challenges around site selection, ranging, pricing, and logistics all make convenience a tough nut to crack. Morrisons also faced players with over a decade’s experience in the channel, no walk in the park by any means.
“The rationale behind price matching a limited range discounter through Match & More also has to be questioned. Discounters’ sleek operating model, limited range, plethora of shelf-ready packaging and lower staff numbers per store make it uneconomic for a full-range supermarket to price match a discounter.
“Morrisons may be moving in the right direction under new management, though this has yet to show in the numbers.”
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