Morrisons looks both North and South in new store programme

The Bradford-based supermarket chain is keen to expand its footprint into parts of the South and Scotland where people have no access to a nearby store.

Finance director Richard Pennycook said: "There are still seven million UK households that can't get to a Morrisons store, they're not within a 15-minute drive."

The plan is to add a further 1.5m sq ft of selling space over the next three years.

Around two thirds will be larger stores although the group also has a pipeline of smaller stores which it is keen to develop following the successful integration of the 34 former Somerfield stores acquired from the Co-op last year.

Morrisons, whose new chief executive Dalton Philips starts at the end of this month, posted a 21 per cent rise in underlying pre-tax profits to 767m for the year to January 31, beating analysts' expectations.

The group said it expects the economic environment to remain

challenging, disposable incomes to be under pressure and value to be a high priority for consumers.

During 2009 sales of its own label value range rose 34 per cent, but sales of premium organic and fairtrade products both declined as shoppers tightened their belts.

Retailers fear that whoever wins the General Election, 2010 will be a year of increasing taxes, lower public spending and higher unemployment.

Morrisons, which has over 420 stores, has outperformed bigger rivals Tesco, Leeds-based Asda and Sainsbury's, helped by its focus on low prices, promotions and fresh-food counters.

Morrisons' like-for-like sales rose six per cent over the year, down from the previous year's stellar 8.2 per cent growth.

Some analysts were disappointed the group did not announce a new plan to replace the three-year Optimisation Plan to improve distribution and operating systems which ended in January.

"Good, but just more of the same," was the verdict of Collins Stewart's Greg Lawless.

Analysts also want to hear whether Mr Philips will follow rivals into markets such as household goods, online shopping, reward cards and overseas stores.

Analyst Sam Hart, at Charles Stanley, said: "Philips is not expected to initiate a full strategic review of the business, but key decisions will have to be made on whether to expand more aggressively into non- food and whether to launch an on-line grocery delivery service."

Mr Philips' initial thoughts on the business are likely to be presented alongside the interim results in September.

Morrisons' shares closed down 2.8 per cent last night, a fall of 8.5p to 295.7p despite the group raising its dividend by 41 per cent to 8.2p a share.

Morrisons said it put in place 30,000 price cuts during the year.

Chairman Sir Ian Gibson said the supermarket would continue with its long-term strategy of investing in growth.

"We believe that Morrisons' unique offer of high quality, fresh food at great value prices will continue to attract customers from our competitors and drive market share growth in the year ahead," he said.

Turnover rose six per cent to 15.4bn.

Christmas trading provided a boost for the group as it outperformed the market for the fourth year in a row during the festive season, putting larger rivals in the shade. However there are no plans to follow Tesco and Sainsbury's and launch a loyalty card despite the success of the Christmas voucher scheme which offered 25 off the Christmas shop.

Morrisons said that based on research from Kantar it believes it has grown its share of the market to 12.6 per cent from 12.3 per cent.

More customers visited the group's stores and existing customers spent more money during 2009.

Around 10.5 million customers visit a Morrisons store each week, a new record for the group.

A background in retailing

Dalton Philips has a strong international retail pedigree.

The Irishman, who was chief operating officer at Canada's biggest grocery chain Loblaw, was chosen over the leading internal candidate finance director Richard Pennycook.

Morrisons said Mr Philips, 41, will take up the role on March 29, replacing Marc Bolland who left the company in December to become chief executive of Marks & Spencer.

In addition to his experience in Canada, Mr Philips has a broad understanding of the supermarket sector having worked for Asda's US parent Wal-Mart for seven years.

Mr Philips worked for Wal-Mart's international division between 1998 and 2005.

He was poached by Wal-Mart's arch rival Loblow in 2007 where he worked closely with chief executive Allan Leighton – the former Asda chief executive.

Mr Philips, his wife and three young children will be relocating to be near Morrisons' headquarters in Bradford.