Morrisons reports 'best year' as profits rise

Underlying profits before tax rose 8% to £935m in the year to January 29 as the grocer’s budget M Savers range struck a chord with customers.

Total sales rose 7% to £17.7bn as Morrisons attracted a record number of customers, up 400,000 a week.

Chief executive Dalton Philips said it had been Morrisons’ “best year yet” fuelled by “promotions customers understood”.

But he added that the retailer would employ “tight cost discipline” to ensure a strong performance in the coming year.

Philips said: “Customers were having a tough time but we responded with a new M Savers brand for budget conscious shoppers, promotions that customers understood, and industry leading service.

“We know that 2012 will be tough, and we will be working hard to deliver even better value for our customers.”

The retailer said that the launch of a transactional Morrisons.com website is scheduled for late 2012.

Philips said: “We have ambitious plans for the long term development of the business, through new supermarkets, convenience stores and the development of our multi-channel capabilities. I am confident that Morrisons will make further progress this year.”

Chairman Sir Ian Gibson said: “This was another good year for Morrisons, despite a tough economic backdrop.

“Record numbers of customers visited our stores and we delivered an 8% increase in underlying earnings and an 11% increase in the dividend, whilst also investing for the long term health of the business”.

Morrisons plans to “expand” its M Local offer. It currently has three of the convenience stores.

Philips added: “We expect a challenging year in 2012.  Building on good performance last year, a growing customer base, tight cost discipline throughout the business and the range of new opportunities that are being pursued, we are well positioned to continue to deliver profitable growth.”

Shore Capital analyst Clive Black said: “We harbour more mellow thoughts on Morrison than we have for some time. This more deflated feeling towards the stock reflects our concern that the promise of self-improvement and diversification may not lead to the previously anticipated earnings outcome.

“The focus of management’s attention may now be really more about protecting what Morrison has rather than robust earnings growth.”

The grocer will open 20 more M Local convenience stores this year and hopes to open a further 50 next year.

Veteran retail analyst Nick Bubb said: “The final results are a bit better than expected. The basic message is that, thanks to productivity work, profits this year will not be unduly held back by the roll-out plan for the new convenience store chain and the big expansion of Kiddicare but that will be a stretch.

“We were most interested to hear about the roll-out plan for the much-vaunted ‘store of the future’ format and at first glance feel a bit disappointed that Morrisons are still fiddling about with this, renaming the concept ‘Fresh Formats’.”