Morrisons sees huge change in way customers are shopping

The Bradford-based group said customers have become a lot more professional in the way they shop.

“A third of our customers are saying they are getting to the end of the month and they literally have nothing left over, so they are having to change the way they shop,” said chief executive Dalton Philips.

Shoppers are ditching credit cards, with transactions down eight per cent, in favour of cash. They are comparing pack prices and contents, for example, picking the lasagne with the highest beef content, and they are going online to check prices.

In addition they are buying more goods on promotion and a new trend is to go shopping with friends and split the cost of cheaper bulk purchases. These include any goods that are on half price offers or highly discounted items such as washing powder, dishwasher tablets and pet food.

Customers are also using social media such as Facebook and Twitter to share deals with friends and family.

“The mantra was time is money, now time saves money,” said Mr Philips.

“The last three years have seen the biggest drop in spending since between 1980 and 1983. Consumers can see no end in sight and customers have a real desire to reassert control over the household budget.”

He was speaking yesterday as Morrisons beat forecasts with an eight per cent rise in first-half profits thanks to its focus on fresh foods, low prices and promotions, which are helping it to win customers from bigger rivals.

Shopper numbers rose by one per cent to 11.5 million customers a week, a new record for the group.

Morrisons reported underlying pre-tax profits of £442m in the six months to July 31, ahead of analysts’ average forecasts of £437m.

Like-for-like sales rose 2.2 per cent, excluding petrol and VAT sales tax, beating forecasts for an increase of 1.9 per cent.

The half year figure was below the 2.5 per cent growth seen in the first quarter, which was boosted by a strong Easter and celebrations around the Royal Wedding.

Morrisons said it is the fifth year in a row it has outperformed the rest of the grocery market, as half-year turnover rose 7.4 per cent to £8.7bn.

The company said longer opening hours and initiatives such as its price crunch campaign are attracting customers.

Analyst Dave McCarthy at Evolution said: “This is a good set of results in a difficult environment. Morrisons has won underlying market share, has grown volumes in a market with volume declines and has delivered robust profit growth.”

Analyst Clive Black at Shore Capital said: “Morrisons is a well run and strong company. In transparently difficult times it is steering a good course and management deserves credit for the sustained performance and progress that is being made. Much still needs to be clarified as to the benefit or otherwise of the programmes and initiatives that are underway to improve and develop the business, but we see the market as taking an appropriate and proportionate view on the risk-reward equation.

“In volatile times, with its asset rich balance sheet, attractive aforementioned income credentials and what we deem to be a benefit from its share buy-back programme, Morrisons is a very effective downside hedge.”

The new programmes and initiatives include a convenience store trial, with the first M local shop opening in Ilkley. Mr Philips described early results as positive.

“More and more customers are using top up shopping, it’s a significant opportunity for Morrisons,” he said.

M Local charges the same price for fresh food as larger Morrisons stores, but the average basket size is 3.5 per cent more expensive than bigger stores due to a mark up on non-food and packaged goods.

Mr Philips said the 3.5 per cent mark-up is cheaper than the four to eight per cent mark-up at its competitors.

Leeds-based Asda is the only one of the big four supermarkets to charge the same price in smaller and bigger stores.

Other initiatives include a £3bn investment in an online shopping operation, which has been kick-started with the acquisition of online retailer Kiddicare for £70m.

Morrisons has hired former Apple executive Simon Thompson to head up its online grocery business.

[email protected]