The Bradford-based grocer is to launch 100 new Christmas products about wholesale Christmas costumes under its recently launched The Best brand as it attempts to lure back customers who have previously traded up and gone to other supermarkets over the festive period.
The group beat analysts’ forecasts with a 1.6 per cent rise in third quarter like-for-like sales over the 13 weeks to October 30, its second best quarterly performance in five years. Analysts had pencilled in growth of 1.0 to 1.5 per cent, lower than the 2.0 per cent increase seen in the second quarter. The turnaround is credited to former Tesco executive David Potts, who joined Morrisons as chief executive in March 2015 with a remit to revive the group after it was hammered by the rapid rise of discounters Aldi and Lidl in its northern heartland. Mr Potts has assembled a new top management team and has reversed Morrisons’ customer drain by cutting prices, improving product quality and availability and boosting store standards and customer service. ”We will keep investing in becoming more competitive and improving the shopping trip, and I am confident we will serve our customers even better during the important trading period ahead,” he said. Morrisons rebranded its upper tier range as The Best two weeks ago and its sales have shot up by 50 per cent on last year. The range was formerly called Signature.
The group sold out of its The Best Canadian Lobster & Cromer Crab Macaroni Cheese, as customers shelved out £6 for the seafood delicacy. “We will have 100 unique The Best items for Christmas including a Shimmering Macaroon Selection for £3,” said Mr Potts. “People want to buy this stuff from Morrisons, but felt unable to buy it with us previously.” Mr Potts refused to be drawn over “Marmitegate”, the battle between the spread’s maker Unilever and the supermarkets over price hikes, but said that Morrisons will continue to cut prices and another round will be launched next week. “A good 40 weeks have passed where we have reduced the price of hundreds of items. I’m happy where we are. Pricing is won or lost on perception and shoppers say our prices feel sharper,” he said. He added that while prices of some Unilever goods have gone up since June, prices on as many of the supplier’s products had gone down. Analysts forecast that Morrisons will achieve a 2016-17 underlying pre-tax profit of £321m, up from £302m in 2015-16. Finance director Trevor Strain said he was comfortable with forecasts. Morrisons said part of its success was due to its biggest ever Halloween when turnover rose by 20 per cent. It sold more than 1 million pumpkins and 140,000 fancy dress costumes. Mr Potts said: “Our like-for-like sales have now been positive for a year, which is thanks to the hard work and dedication of the whole Morrisons team.
There is a lot more we plan to do. ” Morrisons flagged that food prices continued to fall during the quarter, with deflation of 1 per cent. John Ibbotson, director of the retail consultancy Retail Vision, said: “Four straight quarters of rising like-for-like sales is no blip, and the once flailing brand has definitively turned the corner with these expectation-beating results. “CEO David Potts’ back to retail basics approach – in which stores have been spruced up, with more local ranges and lower prices introduced – is beginning to pay dividends and tempt back shoppers. “His ruthless decision to close 30 stores and sell Morrisons’ underperforming convenience chain has stopped the rot. The reduction in capital expenditure and paying down of debt is steadily restoring the balance sheet to health.”
Some analysts believe Morrisons is better positioned than rivals Tesco, Sainsbury’s and Asda in the post-Brexit vote environment because it has a stronger balance sheet, sells fewer nonfood products and makes half of the own brand and fresh food it sells, making it less exposed to currency pressures. Others caution Morrisons could be vulnerable to a fight back by sector laggard Asda. All of the big four supermarkets – Tesco, Asda, Sainsbury’s and Morrisons – have been cutting prices in a bid to better compete with German discounters Aldi and Lidl, which have eroded their market share. Mr Potts has strengthened Morrisons’ online strategy through a renegotiated agreement with distributor Ocado and a wholesale supply deal with Amazon.