Morrisons enjoys first sales rise in 18 months

Sales shrank at Tesco, Asda and Sainsbury’s and the price war continues

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Morrisons’ new boss, David Potts, was given a boost after the grocer reported its first sales rise in 18 months; it was the only one of the Big Four to lift sales.

Sales shrank at Tesco, Asda and Sainsbury’s and the price war continues, but Mr Potts managed to give himself some breathing space before what promises to be a feisty annual general meeting tomorrow, when shareholders could revolt over payouts to the ousted boss Dalton Philips.

Sales rose just 0.1 per cent, according to Kantar Worldpanel, but analysts said this was a symbolic victory for the supermarket, which is set to be dumped out of the FTSE 100 later this week.

Fraser McKevitt, the head of retail and consumer insight at Kantar, said: “A committed core of loyal Morrisons consumers is responding positively to recent initiatives and business has been boosted online.”

The supermarket signed a 25-year deal with Ocado two years ago, at a cost of £220m, to offer online services decades after its rivals had already established strong internet growth.

Mr McKevitt added that Morrisons’ premium own-label lines – which command higher margins than branded goods – are also performing well for the first time.

By comparison, sales at Tesco and Asda fell harder than at any other supermarket on the high street in the 12 weeks to 24 May, compared with a year earlier.

Sales at Tesco fell 1.3 per cent and its market share dropped from 29 per cent a year ago to 28.6 per cent, with Kantar revealing that sales in the grocer’s big-box stores were falling faster than at all of its competitors.

Dave Lewis, Tesco’s chief executive, has already shut down 42 larger stores.

At Asda there was disappointment as the steadfast refusal of Andy Clarke, the chief executive, to engage in the heavy discounting which has flooded the sector continued to be counterproductive.

Sales fell 2.4 per cent – making Asda the worst-performing of all the supermarkets. Last week Mr Clarke said first-quarter sales had dropped 3.9 per cent and warned that 2015 remained challenging.

There was some good news for the supermarkets, however, as the price deflation which has plagued the market for more than a year started to ease off.

In 2014, arguably one of the toughest years in the grocer sector, the price war and low oil prices sent food prices plummeting. In the past 12 weeks prices continued to fall 1.9 per cent but Mr McKevitt pointed out that this was a slight improvement on last month, when they dropped 2.1 per cent.

He said: “We are still in a period of negative inflation but it’s starting to ease off. If trends continue we expect to see prices rise in the next year.”