Morrisons posts plunging pre-tax profit – down 52%
Revealing another catalogue of falling numbers, the retailer admitted total turnover had fallen by 4.9% to £16.8bn and like-for-like (LFL) sales, excluding fuel and VAT, had dropped by 5.9%. The fall in pre-tax profit was around the mid-point of the guidance set a year ago and compared with profit of £719M in the previous financial year.
The business made a loss before tax of £792M, compared with a loss of £176M in 2013/14.
Earnings per share plunged 53% to 10.9p.
Loss of 380 jobs
The retailer announced plans to close 23 unprofitable M Local convenience stores during the year with the loss of 380 jobs. It planned to significantly slow the pace of new convenience store openings.
Morrisons’ chairman Andrew Higginson said last year’s trading environment was tough, with no improvement expected this year. “However, Morrisons is a strong, distinctive business – we own most of our supermarkets, have strong cash flow, and are famous with customers for great quality fresh food at low prices. This gives us a good platform,” said Higginson.
Under new chief executive David Potts, who joins Morrisons on Monday (March 16), the retailer will focus on building trading momentum and “being more like the Morrisons our customers expect”, said Higginson.
The retailer had been at its most effective when Sir Ken Morrison was at the helm, Higginson disclosed in a candid BBC Radio 4 interview.
Andrew Higginson on Sir Ken
“Morrisons was at its most potent when it was the fifth-placed player and Sir Ken was running the business.”
“Morrisons was at its most potent when it was the fifth-placed player and Sir Ken was running the business,” he told the Today programme.
“It’s great strengths are around fresh food, the service quality of the food, the great prices. The cornerstone of the business being fresh – whether that’s the butchers, the bakers, the fishmongers. And all of that is still there and just needs to be revitalised. That will remain the cornerstone of the business, we need to be that quirky Morrisons again with the focus on fresh.”
The retailer needed to get “in tune with its customers” based on the cornerstone of fresh food and great service. “Things like butchers in stores, which our rivals don’t have, and we need to get back to those core strengths having a great grocery offer to complement it, big promotions and so on.”
‘Success measures will be simple’
Morrisons at a glance
- Loss before tax of £792M
- Total turnover down 4.9% to £16.8bn
- LFL sales, excluding fuel and VAT, down by 5.9%.
- Earnings per share down 53% to 10.9p
The measures of the firm's success would be straightforward, said Higginson in a statement accompanying the latest results. “Success measures will be simple – more customers buying more from us. More customers means more volume growth which, ultimately, will lead to better like-for-like, profitability and shareholder returns.”
Chief financial officer Trevor Strain reported good progress on plans to generate £2bn of cash, while making £1bn of cost savings to invest in the business. Morrisons was “determined to keep lowering prices and keep them consistently low for our customers”.
Leading City analyst Shore Capital said the word “tumultuous” was not inappropriate to describe Morrisons’ financial year. The retailer had showed the biggest contraction in LFL sales ever seen by a superstore, according to Shore Capital, which retained its 'buy' advice on Morrisons’ stock.
Meanwhile, new research has identified Aldi and Waitrose as the UK’s fastest growing supermarkets, in a further sign of the growing polarisation of the UK grocery market. Of the big four supermarkets, Morrisons lags in fourth place behind, Tesco – which is starting to showing signs of revival, according to analysts – Asda, and Sainsbury.
