Morrisons tipped to defeat Tesco despite fall in sales

Dalton Philips: Chief executive is expected to report another sales decline this week

Both firms have been hit by an exodus to cheaper German discount rivals Aldi and Lidl, but Moody’s said that Morrisons has a “slightly better risk profile than Tesco” and a “decisive strategy of narrowing the price gap with the discounters”.

Bradford-based Morrisons recently launched a new loyalty card called Match & More, which promises to match the prices of Aldi and Lidl as well as Asda, Tesco and Sainsbury’s, or it will reimburse customers.

It is part of a wider plan announced in March to invest £1bn in price cuts over three years as chief executive Dalton Philips battles a shrinking market share and plunging profits.

Morrisons is expected to report a sharp decline in sales on Thursday.

Analyst are expecting a five to six per cent fall in like-for-like sales in the 13 weeks to November 2.

Earlier this month closely-watched data from Kantar Worldpanel showed sales at Morrisons fell 1.8 per cent in the 12 weeks to October 12 compared with a year ago, with its market share dropping to 11 per cent from 11.2 per cent.

However analysts at Shore Capital said this was an improvement on half-year results last month which saw like-for-like sales slump 7.4 per cent with profits plunging 51 per cent to £181m.

The broker said the supermarket’s price cuts “may be starting to gain some traction“ in the third quarter.

However, the big three listed supermarkets have all seen their share prices tumble as investors desert the sector.

Morrisons shares have fallen by around 45 per cent over the last year, Sainsbury’s have fallen about 40 per cent and Tesco shares have tumbled 53 per cent.

Morrisons has overhauled its antiquated IT infrastructure over the last few years.

It also made a belated entry into online grocery shopping in January, in a partnership with Ocado.

Analysts at Moody’s said: “Morrisons has recognised that price has become the number one driver for customers and that it needs to narrow the price gap with the discounters to retain market share.

“Morrison has also been more nimble in addressing costs as an offset to price reductions.”