Morrisons has reported a slowdown in sales growth as Britain’s supermarket battle intensifies, underlining the fierce pressure facing traditional grocers from discounters and rising operating costs.
The retailer said total sales rose 1.7 per cent to £4 billion during the 13 weeks to April 26, down from growth of 2.6 per cent in the previous quarter. Like-for-like sales growth also eased, slipping from 2.8 per cent to 2.2 per cent.
The figures highlight the increasingly difficult trading environment confronting Britain’s major supermarkets as consumers remain highly price-conscious and competition for market share becomes ever more aggressive.
The challenge has become particularly acute for Morrisons, which recently lost its position as Britain’s fifth-largest supermarket chain after being overtaken by discount rival Lidl.
Once one of the dominant forces in British grocery retailing, Morrisons has seen its market share steadily eroded in recent years as shoppers increasingly gravitate towards lower-cost alternatives.
Chief executive Rami Baitieh nevertheless sought to strike an optimistic note, pointing to an encouraging start to the current quarter and expressing hopes that events including the World Cup and Father’s Day will help drive spending.
Behind the scenes, however, the company continues to focus heavily on cutting costs.
Underlying earnings rose 5.7 per cent to £323 million during the first half of the financial year, helped by a further £48 million of cost savings as management pushes towards a £1 billion efficiency target.
The drive for savings has not been without consequences. Last month Morrisons announced plans to close around 100 loss-making convenience stores, citing growing cost pressures and the impact of Government policies on operating expenses.
At the same time, the retailer is attempting to expand its convenience presence through franchised outlets, opening 30 new Morrisons Daily stores during the quarter and planning hundreds more in the years ahead.
The results illustrate the balancing act facing supermarket executives across the sector: cutting costs aggressively enough to protect profits while investing sufficiently to compete against fast-growing rivals.
For Morrisons, the immediate priority remains clear. In a market where customers can switch allegiance with a single shopping trip, maintaining value credentials has become just as important as protecting margins.
The question for investors is whether the turnaround strategy can restore momentum quickly enough to halt the retailer’s gradual loss of ground in Britain’s increasingly brutal grocery war.
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