Morrisons’ profit recovery on track

Morrisons, the fourth largest supermarket group in the UK, presented its interim results for the 25 week period ending 29 July 2007. Sales increased 2.8 per cent compared to the prior period. Like-for-like sales grew 2.7 per cent (2.3 per cent excluding fuel). Operating profits however soared 57 per cent, as a result of improved operating margins.

“Morrisons Optimisation Plan is on track and delivering significantly improved profits through margin gains and management of our cost base”, said chief executive Marc Bolland. “We have made a strong start to our objective of becoming the food specialist for everyone with a positive customer response to our rebranding and the many developments in store. We will continue to focus on strongly improving operating margins whilst at the same time shaping Morrisons for future growth.”

Poor weather conditions – a wet summer and serious floodings in the UK – as well as two outbreaks of food & mouth disease and price hikes for a number of basic food commodities had a negative impact on the business environment. Morrisons also refers to aggressive price competition in the industry, which happens against a background of British customers feeling the pressure on their disposable income.

Morrisons therefore commits itself to remain competitive through rigourous control of its cost base. “In our planning, we had anticipated that the grocery sector would remain fiercely competitive. We have not, therefore, revised our plans or expectations in the light of the most recent market conditions”, reads the retailer’s interim statement. For the second half of its business year, Morrisons expects to improve its sales levels by various marketing activities and price reductions, despite further commodity cost rises.