Supermarket Morrisons has reported a like-for-like (LFL) sales decrease of 0.9 per cent in its first half year, it has been announced today.
Profit before tax also saw a fall, decreasing two per cent to £440 million in the year to July 29th 2012, though underlying profit rose one per cent to £445 million.
Commenting on the context of the results, Morrisons Non-Executive Chairman Sir Ian Gibson said: “With ongoing commodity inflation continuing to weigh on already fragile consumer confidence and market conditions becoming ever more challenging, we have had to work even harder for our customers during the first half.
“Against this backdrop, Morrisons has increased sales and underlying earnings and delivered good dividend growth.”
However, some feels that these disappointing results are indicative of a wider trend within the grocery sector.
Joseph Robinson, Senior Consultant at Conlumino, noted: “Morrisons’ update offers yet further evidence that the UK food & grocery market is entering a markedly more difficult phase, underpinned by lower food inflation and sustained pressure on consumer disposable income.
“For Morrisons, a decline both in its like-for-likes and profitability is also indicative of the grocer’s high exposure to the north, and intensifying competitive pressures.
“However, while undoubtedly improving its own positioning, Morrisons has encountered an aggressive and resurgent Tesco, which has experienced an improvement in performance partially off the back of promotions such as 50p off a litre of petrol. The discounters too, have been steadily growing market share.”
Earlier this week, figures released by research group Nielsen revealed that sales volumes across UK supermarkets jumped 1.7 per cent year-on-year over the four weeks to August 18th 2012, though of the big four Morrisons fared worst with a market share fall of 0.3 per cent to 11 per cent.
Nonetheless, the grocer continues to eye expansion both in bricks and mortar offerings and multichannel.
Fresh food format stores are on track to open a total of 100 stores by the end of the year as 45 have now opened while it is set to launch online with a Morrisons Cellar wine range in the second half.
Morrisons CEO Dalton Philips commented: “Although the sustained pressure on consumer spending was reflected in our like-for- like sales performance, we have made further good progress against our strategic objectives - the building blocks which are the foundations of the future success of our business.
“By the end of the year our new Fresh Formats will be in over 100 stores and we are now ready to launch our convenience stores in London supported by our new distribution centre.
“We have also extended our food production capabilities and will launch wine as our first online category. We expect to make further progress in the second half of the year.”
It is hoped that these anticipated developments will help give the company contemporary appeal, a factor which has been missing from its current offering, according to Phil Dorrell, Director of retail consultants Retail Remedy.
“Pragmatism, it has plenty, but panache, contemporary appeal — far less so,” he said.
“Modernisation does not come naturally to a Yorkshire company and unless it makes some radical changes soon, it will lose even more market share and authority.
“Thankfully, the old guard within Morrisons are on the way out and the removal of Richard Pennycook as CFO is proof positive that Dalton Philips has demanded change.
“Morrisons’ growth plans are ambitious and with so much rebuilding underway its major challenge in the years ahead will be maintaining an operational focus.
“If Morrisons is to achieve any kind of long-term gain, it’s going to have to submit to some serious short-term pain.”