Video: Morrisons profits down but customers returning says new boss

Morrisons is celebrating its first positive sales quarter in four years and said customers are returning following a complete overhaul by chief executive David Potts.

Morrisons posted an annual profit of £242 million, down from £345 million a year ago after closing a number of stores.

Mr Potts has got rid of 800 surplus head office jobs, brought in 5,000 more in-store staff, hiked staff salaries and slashed prices in a bid to return the Bradford-based grocer to its former glories.

One year into the job, his efforts appear to be finally paying off.

Sign up to our daily newsletter

The i newsletter cut through the noise

“Customers are coming back. They come back when we get things right. Customers want us to be more competitive,” said Mr Potts.

Morrisons posted an annual profit of £242 million, down from £345 million a year ago after closing a number of stores.

“They want better service and less gaps on the shelves.”

He said that customer satisfaction has risen 10 per cent on last year.

The latest Which? report claims that Morrisons has overtaken Leeds-based Asda as the cheapest main supermarket following Morrisons’ 1,000 price cuts earlier this year.

​Which? said Morrisons​ has unseated long standing champion Asda, which has been cheapest every month since ​it​ started tracking in July 2013.

Morrisons posted an annual profit of £242 million, down from £345 million a year ago after closing a number of stores.

“We’ll keep cutting prices for customers and have some exciting plans for the year ahead,” said Mr Potts, who declined to give further details.

​Morrisons reported a 0.1 per cent increase in like-for-like sales in the three months to January 31, an improvement on the two per cent fall during the year to January 1.

This was up from a six per cent decline in 2014.

Analyst Clive Black at Shore Capital said: “We believe that after a period of sustained turmoil and ultimately decline, 10 months into Mr Potts reign Morrisons ‎is in much safer hands, resulting in a more competitive business with a stronger financial constitution and a brighter future.”

But analyst John Ibbotson at Retail Vision said: “While Morrisons’ numbers have started to improve, and Mr Potts is doing a good job, it’s hard to believe we are entering a new era for the struggling grocer.

“Morrisons had a half decent Christmas in relative terms and the Amazon tie-up has put a spring in its step but the market environment it is operating in remains as brutally competitive as ever.

​​“Morrisons may be back in the FTSE 100 and it may have teamed up with Amazon, but many will argue its core business is still mutton dressed as lamb.”

Morrisons reported a rise in footfall for the first time in a year with a 1.6 per cent increase in customer transactions in the three months to January 31.

This followed a fall in customer numbers in the three previous quarters. In the first quarter they fell 3.2 per cent.

“There is an affection for Morrisons and as we provide what people truly care about there is an opportunity to increase the popularity of the brand,” said Mr Potts.

“Our identity had become blurred, but it is becoming clearer. This will be a three phase recovery - fix, rebuild and grow. customers are beginning to notice and value the improvements.”

As expected the grocer reported a fall in annual profit​s.

Amid stiff competition from discounters Aldi and Lidl and a vicious price war among its peers, Morrisons said it made an underlying pre-​tax profit of ​£302​m in the year to Jan​uary​ 31.

​This was lower than analysts’ forecasts of £307m and below the ​£413m it made the previous year.

It represents a fourth straight year of decline and a nine year low.

Steve Clayton, head of equity research at Hargreaves Lansdown said: “Morrisons is still a work in progress, but the company appears to be heading in the right direction. The group is focusing on cash flow and reinvesting again and again into their pricing proposition.

“Like for like sales turned positive in the latest quarter, which shows that Morrisons can generate sufficient extra sales volumes to offset the ongoing level of price deflation. Customers are also coming back to the stores, as evidenced by rising transaction numbers.

“With the improving sales trend backed up by positive news on cash flow and debt repayments, Morrison look to have pulled safely through the worst.”