Morrisons loss sends shockwaves across retail sector

Announcing a 2.8% drop in like-for-like sales for the last year, Morrisons chief executive Dalton Philips said the grocery sector was undergoing the biggest structural shift since the advent of supermarkets in the 1950s.

He announced plans to take on the likes of Aldi and Lidl with three years of investment worth £1 billion but this was not enough to prevent shares declining 9% or 20.75p to 212.5p.

The FTSE 100 Index was 15.2 points lower at 6605.7 as China’s uncertain economic prospects continued to worry investors, particularly after the release of more disappointing data.

Government figures showed industrial production rose by a lower than anticipated 8.6% at the start of this year, while retail sales also grew by less than hoped for.

Among other grocers, market leader Tesco dropped 14.6p to 299.7p and Sainsbury’s lost 24.3p to 308.85p after Morrisons issued a profits warning for the current financial year. Marks & Spencer was 9.7p lower at 464p.

There was better news elsewhere in the retail sector after Argos and Homebase owner Home Retail Group upgraded its profit guidance for the second time this year.

Chief executive Terry Duddy, who is retiring today after 15 years with the Argos business, said profits for the year to March 1 will be slightly ahead of current market expectations of up to £111 million.

The update lifted shares in the FTSE 250 Index stock by 6% or 12.3p to 217.4p, propelling it to its highest level since June 2011. B&Q and Screwfix owner Kingfisher benefited from the update in the FTSE 100 Index as its shares rose 7.3p to 410.2p.

Centrica was the biggest riser in the top flight after broker HSBC highlighted the British Gas owner’s strong upstream prospects as it increases its focus on more productive areas such as Norway and the United States.

HSBC upgraded its recommendation on Centrica to overweight, resulting in shares improving by 2% or 7.75p to 335.65p. However, rival SSE was a penny lighter at 1424p and National Grid dropped 9p to 824p after the pair were downgraded in the same note from HSBC.