Morrison steps up Safeway price cutting

WM Morrison plans to reduce prices on a further 2,000 Safeway products over the next month as part of its move to slash prices throughout the stores it acquired earlier this month.

The Bradford-based supermarket chain, which yesterday posted a strong rise in full-year profits, wants to cut Safeway prices by 6 per cent by the autumn, and has already cut prices on more than 800 basic items such as milk and butter.

It hopes the move, which analysts expect to provoke a major price war, will help it to halt the accelerating slide in Safeway's underlying sales, which are 4 per cent lower than last year. Its own like-for-like sales continued to outshine its rivals, rising 9.7 per cent during the past six weeks.

Morrison's shares rose 2.75p yesterday to a record 256p.

Bob Stott, the joint managing director, said the group was close to offloading "one package" of the 52 Safeway stores it was ordered to sell by the Competition Commission.

Four of the 52, which it has chosen to swap for four of its own sites, will be the first to receive the Morrisons makeover, starting next month with Rippon in North Yorkshire.

The group, which expects to cut 1,200 posts from Safeway's head office, said it had received 300 requests for redundancies since it began consulting staff over the job cuts earlier this week. It hopes to lure some ex-Safeway staff up to Bradford, where it plans to more than double staff numbers at its head office to about 1,500.

Sir Ken Morrison, the executive chairman, said he had not unearthed any surprises since taking control of Safeway, despite admitting to having only "sketchy" information before the deal was finalised. "There are so many ways of doing the same job. This is puzzling us a little bit," he said.

Morrisons' reported a 13 per cent rise in pre-tax profits to £320m, despite absorbing £10.9m of bid costs. Sir Ken declined to reveal Safeway's bid costs, which are estimated to have been up to £50m.

He also declined to reassure former Safeway shareholders about the enlarged group's dividend policy, saying only that it "would be revealed each year". Morrison raised its final payout by 20 per cent to 3.25p, which it will pay to Safeway investors.

Asked how long he hoped to remain as executive chairman, Sir Ken, 72, said: "As long as possible, really."