Morrisons’ chief executive Dalton Philips said he is absolutely committed to delivering the grocer’s “big, bold” turnaround strategy despite reporting the worst half year results since the dark days of Morrisons’ troubled takeover of Safeway 10 years ago.
Mr Philips said: “There is a real sense the business is getting back on the front foot.
“There are positive early signs that the changes at Morrisons are beginning to resonate with customers.”
A £1bn self-help programme has lowered prices, cut promotions by 13 per cent, slashed management roles and removed 2,000 product lines that were seen as surplus.
As it warned earlier this year, these moves led to a 51 per cent slump in first half profits to £181m in the six months to August 3.
Like-for-like sales fell 7.4 per cent although industry data from Kantar suggests customers are returning to the chain after the price cuts lured back shoppers who had migrated to discount rivals Aldi and Lidl.
“When we can narrow the gap with the discounters, the opportunity for other points of difference to shine through become immense. We’ve got 10 times their range,” said Mr Philips.
Asked when the new initiatives will start to benefit sales and profits, he estimated that the Bradford-based chain should see progress by the end of the second half.
“We’re growing ahead of the market on produce and meat. In terms of items per basket it’s still a negative number, but we’re trying to get people to shop more,” he said.
He pointed to new data which shows that items per basket fell seven per cent over the winter, but in May, June and July they were down three per cent, indicating an improving trend.
Morrisons has pledged to invest £300m in price cuts during 2014/15, including its ‘I’m Cheaper’ campaign, which cut 1,200 products by an average of 17 per cent. A further 135 prices were reduced by 14 per cent in June.
Morrisons has been hit by its lack of convenience stores and online presence, the two fastest growing sectors of the grocery market, but it is catching up with rivals.
Mr Philips said the group will end the year with 170 to 180 convenience stores and its new online service is now operating in 33 per cent of the country.
“We’ll be close to 50 per cent of the country by the end of this year,” said Mr Philips.
“The one per cent substitution rate is industry leading and on-time delivery is 97 per cent.
“We are planning it will take three years until profitability. It’s going well. We’ll do £200m of online sales this year on an annualised basis.”
The grocer is planning to launch a loyalty card in time for the peak Christmas trading season, but was unable to give much detail due to commercial rea-sons.
“Sometimes being late has its advantages,” said Mr Philips.
“We will take advantage of new technology, as we did with Ocado. We’ve been testing a number of propositions. I’m very confident.”
Morrisons is paying an interim dividend of 4.03p, up five per cent and confirmed a commitment to pay a full-year dividend of not less than 13.65p.
It also confirmed full-year 2014-15 underlying pre-tax profit guidance of £325m to £375m.
Speaking about consumer confidence in Yorkshire, Morrisons’ heartland, Mr Philips said: “There is a rising confidence among consumers. I don’t think the food shopping skills they learned in the recession will be unlearned quickly, especially in Yorkshire.
“The Yorkshire consumer is being very careful how they spend their pennies at the moment, despite the economy improving.”