Morrisons’ profits plummet, as boss underlines faith in manufacturing

By Michael Stones

- Last updated on GMT

Morrisons boss David Potts underlined his faith in food manufacturing
Morrisons boss David Potts underlined his faith in food manufacturing

Related tags Tesco

Morrisons has revealed a 47% plummet in half-year profits before tax to £126M plus plans to close 11 stores, affecting up to 900 jobs, as boss David Potts reaffirmed his faith in the retailer's food manufacturing business.

Like-for-like (LFL) sales fell by 2.7%, excluding fuel and VAT, in the six months to August 2 and were 2.4% down in the second quarter.

Total turnover dropped by 5.1% to £8.1bn, while underlying profit before tax was down by 35% to £117M.

The retailer also revealed plans to close 11 stores, putting at risk the future of 900 jobs.

Potts regretted the “difficult decision”​ to propose 11 unnamed store closures but said their lack of viability justified the decision.

In-house food manufacturing

Meanwhile, Potts reaffirmed his faith in the retailer’s commitment to in-house food manufacturing, saying it offered an essential service to customers.

“Half of the food we sell is fresh and half of that food is manufactured by ourselves,”​ Potts told BBC Radio 4’s Today​ programme. “Whether it is in the manufacturing businesses we wholly own, or in our own stores – we make our bread from scratch and our British burgers from scratch in store.”

Potts said food manufacture was a key point of difference between Morrisons and the other big four supermarkets – Tesco, Sainsbury and Asda – and the limited range discount stores Aldi and Lidl.

“Our staff really do bring these features to life,​he continued. “Our customers do talk about that.”

‘Turnaround will take time’

In the commentary accompanying the results, Potts claimed customers and colleagues were beginning to notice improvements, “but the turnaround will take time and require sustained investment in the proposition”,​ he added.

Turning to Morrisons' £25M cash sale​ of its 140 M local convenience stores announced on Wednesday (September 9), Potts admitted that the retailer had arrived in that part of the convenience channel “quite late”.​ He said: “Despite the best efforts of the company, we were unable to scale the business at this time.”

Meanwhile, read analysts' reaction to the results here​.

Morrisons’ first-half results at a glance

  • 47% drop in half yearly profits before tax to £126M
  • Like-for-like (LFL) sales down 2.7% in the first half
  • LFL sales fell 2.4% in second quarter
  • Total turnover fell by 5.1% to £8.1bn

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Removing the competition.

Posted by Lawrence Lynn,

Not being on for a conspiracy theory, but the wisdom of recruiting and employing so many ex Tesco executives needs to be questioned. Looking at the state of Tesco now and the "financial" chaos that seems to exist, and the fact that Tesco failed in America and are struggling in other countries, one has to wonder if driving down sales and margins, and now reducing square footage, is making Morrison's a target for a takeover bid by Tesco, which would reduce the competition by some 25%. Maybe the conspiracy theory is not so far fetched !!!!.

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Good Night Mr Potts

Posted by Paul Green,

I think that David Potts has finally lost the plot.
As the competition expand their number of stores at a rapid rate, Mr Potts solution to regaining market share is to close stores and sell off the C Stores.
Surely the whole point of a successful retail business is to service as many areas as possible and to persuade shoppers to buy from your stores?
Closing sites will simply create more selling opportunities for the competition.
Mr Potts policies appear to be what generals on the losing side is a war call a strategic withdrawal prior to surrender!
The reality is that David Potts is on a short fuse prior to Morrisons share holders selling out to Christo Wiese and as one of those shareholders I can't wait for it to happen.
Sir Ken must be ruing the day that he relinquished the reins of the company he built from scratch.

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