Morrisons sales soar as revival continues

The revival of Morrisons has continued as the supermarket’s sales soared in the first half of the year, but profits slid almost a third to £142m.

Like-for-like sales, excluding fuel and VAT, rose 4.9% for the six months to 4 August – better than the 3% increase for the same period last year.

Second quarter sales were up 6.3% – its best result for almost a decade.

Chief executive David Potts said Morrisons continued to become broader, stronger and more popular.

The retailer said it had extended its “Fresh Look” programme to more than half its 500 stores, with significant improvements in product range and customer service, and developed its offers for online, wholesale, local and in-store services.

Sales have now risen for the past 11 consecutive quarters and its online delivery service is available to more than three quarters of UK homes, including more parts of southern England and Scotland for the first time.

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Profits were hit by £51m of financial costs including £33m for a bond tender offer. The underlying pre-tax figure was 9% higher at £193m.

Investors have been rewarded with a special interim dividend of 2p a share, sending the total interim dividend up 132% to 3.85p.

Shares in Morrisons have gained pace this year but fell 2.4% to 259p on Thursday, valuing the retailer at just over £6bn.

Richard Hunter at Interactive Investor said Morrisons had delivered more positives than negatives, but added that its “traditional weakness in terms of its convenience store and online offerings are still lagging in comparison to its larger rivals, whilst the proposed merger of Sainsbury and Asda will heap additional pressure on an already fiercely competitive sector”.

Bryan Roberts at TCC Global said: “While praise is due for Morrisons’ underappreciated wholesale activities via Amazon and McColl’s – which still have plenty of headroom for growth – we have been deeply impressed with recent store visits, convincing us that the retailer is achieving genuine unique selling points in an otherwise largely homogenised market.

“Improvements in fresh produce, counters, private label, homewares and clothing augur very well for the business.”

Profit margins were flat at 2.5%, underlining the intensely competitive nature of the UK grocery sector.

Meanwhile, John Lewis said on Thursday that sales at its Waitrose supermarket chain rose 2.6% for the six months to 28 July, but profits dipped 12.2% to £96.4m.

Tesco, the UK’s biggest supermarket, is preparing to launch a new chain of discount stores next week aimed at countering the rise of Germany’s Lidl and Aldi.