Morrisons expects to beat rivals as it chalks up a record year

The Bradford-based grocer said it expects 2012 to be equally as hard as 2011.

Chief executive Dalton Philips said: “We’re seeing 2012 like 2011 because costs are still rising. Fuel prices are up 15 per cent year on year. I don’t see a recovery coming any time soon.”

His comments are in stark contrast to John Lewis which expects business to pick up this year.

But the UK supermarket sector is one of the most competitive in the world and Morrisons shoppers are not as affluent as John Lewis’s.

Mr Philips said Morrisons has seen an increasing trend towards the “professional shopper” – consumers who have a limited budget and will spend time and effort to seek out the cheapest deals.

“They have a specific budget of say £10 or £20 and people are spending 20 per cent longer in the store with half of our customers checking the price on every item,” he said. “Our toad in the hole with vegetables at just 41p a person has proved a big success and people are going on Twitter to look for bargains. It’s a very savvy shopper out there.”

He was speaking yesterday as Morrisons, Yorkshire’s biggest listed company, reported an eight per cent rise in underlying pre-tax profits to £935m in the year to January 29, above estimates of around £922m. Finance director Richard Pennycook said that like-for-like sales excluding fuel and VAT rose by 1.8 per cent.

“We’ve had our best year yet,” said Mr Philips. “Our like-for-like sales performance will be the best number coming out for last year,” he said, referring to his rivals’ performance.

Analyst Sam Hart, at Charles Stanley, said: “Morrisons reported another good set of full year results. The creditable outcome was primarily driven by self-help actions, given the challenging consumer environment and intense competitive environment. Outlook comments for the 2012/13 financial year were cautiously optimistic.”

Mr Philips has overseen a number of new initiatives at Morrisons including the trial of three convenience stores under the M Local banner, including one in Ilkley. These have proved a big success and Morrisons is planning to roll out a further 20 this year with another 50 scheduled to open next year.

“Convenience is growing at twice the rate of the rest of the retail market,” said Mr Philips.

“Our convenience stores will be all about good fresh food. We will do 40 per cent more fresh food for the same price as a superstore.”

Last year Morrisons launched a new fresh food concept in 12 stores, introducing 350 more fruit and vegetable products, reducing space given over to processed foods and knocking down walls so customers can see its butchers, bakers and fishmongers in action. A reduction in non-fresh food items has led to the freeing up of around 10 per cent of space in store with old-fashioned items such as sardines being reduced from 13 lines to eight.

Mr Philips said that stores that have made the changes have seen a 14 per cent rise in produce sales, a 13 per cent rise in both butchery and fish sales and an eight per cent increase in bakery sales.

Morrisons plans to launch an additional 36 ‘fresh format’ stores at a cost of £1.7m per store.

“This will be a differentiator, this is game-changing stuff,” said Mr Philips. “We’ll have 15 per cent of our sales going through these new fresh formats by the end of the first half. It’s almost impossible to replicate.”

The grocer said its store-opening plans are on track with 700,000 sq ft of space set to be opened in the current financial year, compared with 643,000 sq ft in the last year. Mr Philips said the relaunched budget range under the name of M Savers range had received a strong response.

Tesco sparked a battle with its competitors last September when it unveiled the Big Price Drop campaign, prompting Sainsbury’s, Leeds-based Asda and Bradford-based Morrisons to follow suit.

On Monday, Tesco began its fightback after a shock post-Christmas profit warning, detailing plans to refresh hundreds of existing stores with a focus on improving its offers of fresh produce, fresh meat, bakery and counter services.

But Mr Philips said: “We’re taking the fresh market experience to a whole new level. We can do that because we’ve got these craft skills in our business, it’s part of our culture. You just can’t create a butcher or a baker, it takes years and years.”

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