Morrisons signs deal to let Peacocks display

BRADFORD-based Morrisons has signed a deal which will lead to budget retailer Peacocks selling clothes at one of its Yorkshire supermarkets.

Tim Bettley, Peacocks' managing director, said the deal was part of the firm's "ongoing expansion".

A Peacocks spokesman declined to comment on reports that the agreement could be extended to other Morrisons stores before the end of 2010.

It was reported yesterday that the deal with Peacocks could be part of Morrisons' strategy to win more customers by increasing its clothing range. However, the Yorkshire Post understands that the deal will not necessarily lead to a massive roll-out of Peacocks clothing concessions within Morrisons' supermarkets around Britain. Peacocks confirmed yesterday that it had entered into an agreement to sell a full range of products in Morrisons's newly refurbished store in Idle, near Bradford, from next month.

It was reported yesterday that the concession will take up 6,000 sq ft in Morrisons' Idle store, which would have been reserved for alcohol.

Peacocks, which dates from 1884, has 500 stores in the UK, including 70 in Yorkshire. The company floated in 1999 and was taken private by a consortium of investors in 2006.

A Morrisons spokesman said the concession opportunity had been identified at the Idle store as part of its refurbishment.

The spokesman said yesterday: "We aim to introduce a concession which is yet to be identified. This will work in a similar way to other concessions that have operated in Morrisons stores previously including other retail outlets." The announcement came days after Morrisons defended a sharp drop in its underlying sales growth, saying that its performance was ahead of the market.

The Bradford-based group blamed a lack of food price inflation for the modest 0.8 per cent increase in like-for-like sales which it saw during the 13 weeks to May 2.

This was down from a 4.8 per cent increase in the last three months of 2009.

Speaking last week, Morrisons' finance director Richard Pennycook said the group was ahead of its rivals. He predicted that if Morrisons' underlying sales growth was coming in at under one per cent, some of the group's rivals would be in negative territory.

The trading update from Morrisons underlined the pressure on grocers in a competitive sector.

Retailers have expressed concern that steps to cut Government borrowing, such as higher taxes and public spending cuts, could lead to reduced consumer spending.

The UK's third biggest supermarket, Sainsbury's, is expected to post healthy full-year profits of more than 600m on Thursday but there are growing concerns about the impact of slowing food inflation on sales growth.

Sainsbury's – which grew sales 1.7 per cent in the 11 weeks to March 20 – has a growing non-food presence, which includes clothing and homewares under its Tu label.

At its last update, Sainsbury's said online sales were up 15 per cent while non-food ranges were growing at three times the rate of food. Chief executive Justin King – who raised an additional 445m war chest to spend on store expansion last June – will now come under pressure to turn this into bottom-line profits growth.

Seymour Pierce analyst Freddie George is forecasting "top of the range" pre-tax profits of 625m – up from 543m last year – but is concerned about the outlook for food retailers.

His gloom is fuelled by concerns over tougher competition, with Leeds-based Asda looking to make up lost ground after a spell in the doldrums with an aggressive price campaign.

Food inflation will remain subdued and rising fuel costs will eat into monthly budgets, while there are limited opportunities for growth in food without "cannibalising" sales from other stores, Mr George added.

greg.wright@ypn.co.uk