Morrisons to shut 11 stores as profits continue to slide
Morrisons has announced that it plans to close 11 more supermarkets after posting a near 50% drop in half year profits and continued weak sales performance.
The figures for six months to 2 August showed that reported pre-tax profits fell a worse-than-expected 47.2% to £126m on turnover down 5.1% to £8.1bn. Underlying operating profit, which excludes impairment and provision for onerous contracts and property disposal profits, was £163m, with operating margin down 67bps year-on-year to 2.0%.
Amid intense competition in the sector, like-for-like sales for the period slipped 2.7%, although in the second quarter the fall was reduced to 2.4%, helped by recent initiatives aimed at attracting shoppers back to its stores. The performance was better than the same period last year when the chain reported a 7% slump in like-for-likes, although Chief Executive David Potts admitted that Morrisons faces a long journey to get back on track.
The group said it was making progress with its £1bn cost savings programme with a further £189m delivered in first half. Potts also set out six strategic priorities for the business including becoming more competitive, developing popular and useful services, simplifying and speeding up the organisation, and focusing on making its core supermarkets strong again.
To this end, the group announced yesterday that it was selling its troubled M local convenience chain for £25m to a team led by retail entrepreneur Mike Greene and backed by investment firm Greybull Capital. It also today proposed the closure of the 11 underperforming supermarkets which will cost Morrisons £20m. The group has already closed 10 stores this year.
The group also hinted that there could be changes to Morrison’s £200m partnership with Ocado with the statement saying it was considering the broader digital opportunity, and how it can grow it online proposition while achieving an attractive return on capital.
Morrisons added that being competitive was not just about price and that it needed to set out an offer that had real resonance with customers. As a result, the group said it was in the process reviewing its Match & More scheme which analysts have suggested could be scrapped after being criticised for being too complex.
Potts said: "Morrisons will be an organisation that listens. During the first half, the new Executive and leadership teams have been listening hard to colleagues, customers, suppliers and shareholders. They tell us there is a lot for us to do.
"The immediate priority is to deliver a better shopping trip to stabilise trading performance. Our six strategic priorities will then deliver improvement in the core supermarkets, where we have the greatest opportunity. It will be a long journey. We approach the challenge with energy, confidence and many strengths, particularly our strong balance sheet and cash flow, which enables investment in improving the customer shopping trip."