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Morrisons outperforms peers as profits rise 8%


UK supermarket Morrisons today reported an year-on-year underlying profits increase of eight per cent for its first half of trading, with sales growth continuing to outperform the grocery market average.

Profits rose from £410 million in H1 last year to £442 million in the six months to July 31st 2011, while like-for-like sales excluding VAT and fuel edged up 2.2 per cent.

Food price inflation increased during the period, overall grocery industry like-for-like sales grew at modest levels and the sector experienced volume declines, but Kantar Worldpanel data indicates that Morrisons sales grew at 0.8 per cent ahead of the market.

H1 turnover at the supermarket was up 7.4 per cent to £8.7 billion, compared to £8.1 billion at the same point last year, while earnings before interest and tax stood at £458 million and the underlying operating margin of 5.2 per cent was level with 2010’s figure despite the impact of increased and low margin fuel sales within the sales mix.

This morning’s statement indicated that progress is being made on a number of the company’s new initiatives, including the testing of its enhanced fresh food offering in Yorkshire and the opening of two convenience stores under the M-Local fascia.

Some 16 re-branded Nettos opened during the first half too, while plans are in place to better utilise the space in its current property portfolio to roll-out further homeware and fresh food lines in 2012.

Dalton Philips, CEO of Morrisons, commented: “In addition to growing sales and delivering good profit growth, we also made great strides in developing the business for the future.

“We have opened our first convenience store, invested further in our unique production capabilities, increased efficiency across the group, gained valuable insights from our trial stores and taken our first steps towards becoming a multichannel retailer. I am confident we will make further good progress in the second half.”

Morrisons initial foray into online retailing comes after the £70 million acquisition of baby products retailer Kiddicare earlier this year, and the business aims to launch an e-commerce non-food operation in 2012 based on systems used by Kiddicare.

Having also acquired a stake in US e-business FreshDirect in March, Morrisons has been carefully evaluating how it can create a profitable online food selling arm and stepped up its preparations further today by announcing the appointment of ex-Apple marketing boss Simon Thompson as Managing Director for Food.

Darren Shirley from Shore Capital Stockbrokers called Morrisons “a well run and strong company”, and praised the new management team for achieving such a sustained positive performance in difficult trading conditions.

“Much still needs to be clarified as to the benefit or otherwise of the programmes and initiatives that are underway to improve and develop the business, but we see the market as taking an appropriate and proportionate view on the risk-reward equation,” he added.

“In volatile times, with its asset rich balance sheet, attractive aforementioned income credentials and what we deem to be a benefit from its share buy-back programme, Morrisons is a very effective downside hedge.”

Published on Thursday 08 September by Editorial Assistant

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