Morrisons 'encouraged' by third quarter performance despite drop in sales
Morrisons has reported that like-for like sales excluding fuel dropped by 6.3% in its third quarter as it acknowledged that it will take time for its new initiatives to fully benefit its sales performance.
In the 13 weeks to 2 November total sales excluding fuel fell by 3.6%.
In a statement, the supermarket said it was making continued progress in its three year plan and had seen “encouraging” progress in all parts of its strategy and in volume-related key performance indicators.
Items per basket continued to improve and was down 2.4% year-on-year, which was an improvement on the low of -6.9% in the fourth quarter of the previous year.
Alongside further investment in price during the period, Morrisons launched its new ‘Match & More’ price match and points card which offers a price guarantee against discounters Aldi and Lidl as well as Tesco, Sainsbury's and Asda.
In addition, the supermarket said an improved IT platform had helped it to better understand and serve customers and drive cost out of the business. It also made progress with in-store cost initiatives such as restructuring teams, up-streaming some of the invisible manufacturing, and simplifying the range.
During the quarter, Morrisons announced a proposal to close its produce packing facility in the Netherlands and to transfer operations either to growers or to its existing UK produce facilities in 2015. It also exchanged contracts to re-assign eight of the ten former Kiddicare leasehold sites with completion expected in the coming weeks.
Morrisons opened 12 new M local stores, three new core stores, and one replacement in the quarter. The supermarket said it is on track to meet its target of opening 60-70 new M local stores by the year end.
The supermarket’s fledgling online groceries business, which is operated in partnership with Ocado, contributed 0.7% to like-for-likes during the period.
Morrisons chief executive Dalton Philips said: "Morrisons is meeting the challenges created by a period of intense industry competition and structural change with quick and decisive action. I am encouraged by the further progress we have made, especially on a number of key operational measures, cash flow and costs.
"The launch of the 'Match & More' card was another big move for Morrisons. We are the only supermarket that is price matching the discounters and the successful launch last month was a testament to the positive way our 120,000 colleagues are delivering innovation and embracing the changes at Morrisons.
"We look forward to the key Christmas period focussed on offering customers the best in quality fresh food and value for money that Morrisons is famous for."
Looking ahead, Morrisons said it remains confident that it will generate £2 billion of cash and £1 billion of cost savings over three years.
The supermarket now expects its full year underlying pre-tax profit to be in the narrower range £335 million to £365 million (previously £325 million to £375 million), after £65 million of new business development costs and £70 million of one-off costs.
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