Morrisons profits jump as turnaround builds momentum

The supermarket giant posted an 11.6% jump in underlying pre-tax profit to £337m – at the upper end of the £330m-£340m consensus – for the year ending January 29.

Reported profit before tax surged 49.8% to £325m, Morrisons said.

Like-for-like sales excluding fuel rose 1.7% across the year.

A 2.5% uplift in its fourth quarter meant that Morrisons recorded positive like-for-likes in every quarter of its financial year and has now enjoyed five consecutive quarters of growth.

The grocer’s total sales increased 1.2% to £16.3bn despite closing its convenience business, as the turnaround plan implemented by chief executive David Potts and finance boss Trevor Strain bore fruit by winning back customers.

The number of transactions in its supermarkets spiked 4% across the full-year – or 450,000 per week – although items per basket dropped 4.6% as customers carried out smaller shops more often.

Despite the improvements, Potts refused to get carried away and insisted “it’s only one year.”

He said: “Our full year of like-for-like sales and profit growth was powered by listening to customers, and shows what our hard-working team of food makers and shopkeepers can do.

“But, it’s only one year. Our turnaround has just started, and we have more plans and important work ahead.

“If we keep improving the customer shopping trip, I am confident that Morrisons will continue to grow.”

Investment

Morrisons reaffirmed its focus on “capital light growth opportunities” to build sales and profits, pointing to deals with Amazon, Ocado, Timpson and petrol forecourt operator Rontec that were signed this year, as well as the revival of the Safeway brand.

The grocer said it plans to open a further forty Morrisons Daily petrol forecourt stores following a successful pilot with Rontec.

During the year, Morrisons achieved £18m of incremental profit from wholesale, services, interest and online.

It remains “confident” of hitting its £50-£100m medium-term target.

Morrisons has already made £1bn in cost savings and said it has “identified further cost saving opportunities” beyond those already achieved.

It highlighted ordering, in-store administration, procurement of goods not for resale and distribution between manufacturing and retail as the areas it would target to cut costs.

The supermarket giant’s capital expenditure rose 14.8% across the year as it invested in its six strategic priorities.

Cash was ploughed into its ‘Price Crunch’ scheme, while it also invested into improving quality, resetting ranges and redesigning packaging.

Morrisons also brought in a new automated ordering system, which has boosted availability, cutting gaps on shelves by up to 30%.

The grocer is also building on its range of “popular and useful services” in stores and said it plans to roll-out its partnership with Doddle following a successful trial, which was first reported by Retail Week.