Bolland of Morrisons rules out top M&S job

Grocer says 1.1 million new customers are behind 45% rise in pre-tax profits
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Marc Bolland, chief executive of Morrisons supermarkets, has pulled out of the running for the same job at Marks & Spencer as the grocer posted a 45 per cent jump in pre-tax profits and raised its interim dividend.

Asked yesterday if he was ruling himself out, Mr Bolland eventually said he was, although he had earlier been noncommittal and stuck to the mantra "I love Morrisons, I am happy here".

Speculation about who will succeed Sir Stuart Rose as M&S's chief executive by next July is mounting. Mr Bolland is seen as a heavyweight external candidate, alongside Justin King of Sainsbury's, Andy Bond of Asda, Booker's Charles Wilson and Kate Swann of WHSmith.

Since taking the helm at Morrisons in September 2006, Mr Bolland has overseen a turnaround at the Bradford-based grocer, which had struggled after its 2004 acquisition of Safeway.

Mr Bolland's admission is a boost for Morrisons' staff, board and investors. The company delivered another set of recession-busting like-for-like sales, which exclude the impact of new space, although it said that falling food price inflation in the market could dent its powerful sales in the second half.

For the half-year to 2 August, the grocer's 403 stores delivered a 45 per cent surge in pre-tax profits at £449m, up from £309m the year before. Richard Pennycook, the finance director at Morrisons, said: "The profit momentum is somewhat stronger that what we anticipated at the start of the year." The supermarket lifted its interim dividend by 35 per cent to 1.08p.

Morrisons said a driver of its sales growth had been the addition of an extra 1.1 million customers a week from its major competitors over the past two years, which had fuelled its like-for-like sales growth along with product development.

For the half-year, the supermarket's like-for-like sales – excluding fuel and VAT – rose by 7.8 per cent. However, the grocer's underlying sales growth slowed to 7.4 per cent in the second-quarter, which was down from 8.2 per cent in the first quarter, as falling inflation pegged it back slightly.

Sales at the grocer's smaller stores, from 25,000 square feet down to 10,000 sq ft, are outstripping its larger formats. Mr Bolland said: "The smaller stores have the highest sales densities, and they really benefit from the segmentation and product development." Morrisons is particularly bullish about the performance of the smaller Somerfield stores it acquired from the Co-operative. "In the first few weeks, we are already seeing a 50 per cent sales uplift in the pre-acquisition," said Mr Bolland. Given that the smaller sites are easier to secure, Morrisons said the success of the format – in which it is able to sell a full product offer – would help it to move from a "national to a nationwide" supermarket, said Mr Bolland. Over the half-year, total sales at Morrisons rose by 5 per cent to £7.5bn, although excluding fuel it was up by 9.2 per cent.