Grocer Morrisons has seen like-for-like (LFL) sales excluding petrol fall 1.8 per cent in its first quarter amid fierce competition as it progresses with its plans to launch an online offer, it has been announced today.
In the 13 weeks ended May 5th 2013, total sales grew 0.6 per cent, “a steady improvement” on the previous quarter, the grocer said, adding that the figure is in line with expectations.
In March, Morrisons confirmed that it was discussing the use of online grocer Ocado‘s technology to aid its push into the online space and today the chain said that discussions with Ocado are ongoing with plans to debut its online operations in January 2014 remaining on track.
As competition within the grocery and food retail sector increases, discounting and promotions have become more widespread and Morrisons noted that it had “sharpened” its offers as couponing became “a significant factor”.
In order to offer a reduction on everyday products, the supermarket has invested in price campaigns with its ‘Pick of the Street‘ offer and Payday Bonus seeking to give consumers value for money and rewards for loyalty.
Morrisons CEO Dalton Philips explained: “Our promotions have been more innovative and we are explaining Morrisons points of difference more effectively.
“These efforts were further reinforced by the horsemeat scandal which helped drive increasing customer recognition of Morrisons unique supply chain and approach to meat sourcing.
“They now understand that Morrisons is best placed to sell food that is what it says it is.”
Over the period, the grocer opened an additional six stores across the UK including two M Locals units and is on track to meet its target of trading from 100 convenience stores by the end of the year.
Morrisons also acquired more than 80 stores to its convenience pipeline while its Fresh Food format will have been implemented across 40 per cent of its estate by the end of the financial year as the company continues to upgrade new and existing stores.
While such growth hopes to strengthen Morrisons‘ standing in the tough sector, John Ibbotson, Director of the retail consultancy Retail Vision, warned that more needs to be done to encourage growth.
“In barely a year, Morrisons has moved from being the dark horse to the also ran of the supermarket stakes as It is being consistently outpaced by the other big three,” Ibbotson said.
“A pity then than its tie-up with Ocado won‘t do online food until next year, and it has a paltry number of convenience stores.
“Morrisons opened just two this quarter, but Tesco already has more than 2000.
“Morrisons is frantically scrabbling to open 100 convenience stores by the end of the year, but this smacks more of a desperate attempt to catch up rather than any clear vision.
“Morrisons‘ key differentiator from the other members of the Big Four has always been price – and the perception that it offers the best value of the lot.
“That advantage has been badly eroded by undercutting from the true discount stores.
“Even with its improved stores and better offer, Morrisons still looks like a poor imitation of Asda.”
Though Morrisons conceded that it “remains cautious” of the wider economic climate, it emphasised that its net debt of £2.3 billion is in line with expectations as its financial position remains strong.
Philips concluded: “We have made a solid start to the year, with our sales performance improving since the last quarter.
“Strategically, our ambition of building a genuinely multi-format, multichannel Morrisons is right on track.”
