Supermarkets group Morrison on a roll as profits surge

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Supermarkets group Morrison on a roll as profits surge

Investment column

WM Morrison Supermarkets, Britain's fifth largest grocery chain, continued its strong performance yesterday with a 16 per cent rise in half-year profits to £114.5m and an optimistic view of future prospects.

The Bradford-based group poured cold water on the possibility of a bid from Wal-Mart for Safeway saying the US giant which owns Asda is mainly interested in larger hypermarket-style outlets. But it said it had no plans to enter the fray itself. "We haven't got the money to buy Safeway and we ain't for sale, so that's end of story," said joint managing director Bob Stott. "We're interested to sit on the sidelines and see what goes on."

The company said it had only seen the mildest of slowdowns in its sales trends, confounding the views of rivals such as Tesco, which warned earlier this week that sales growth would return to more "normal" levels of 3-4 per cent.

Morrisons reported like-for-like sales growth of 5.7 per cent in the 27 weeks to 11 August. In the five weeks to 15 September like-for-like sales were up 5 per cent on the same period last year. Asked about the prospect of a slowdown, Mr Stott said: "I hope we've seen it."

Mr Stott said Morrisons had stuck resolutely to its offer of low prices with the emphasis firmly on groceries as opposed to non-food. Customer numbers are up and the average spend has risen by 90p to £22.

Mr Stott indicated that Asda's decision to increase the amount of non-food selling space at the expense of food may have helped Morrisons. "I don't think its done us any harm if you look at the figures," he pointed out. "We're food retailers and we're proud of it."

Morrisons currently has 114 stores and is opening five more in the next 10 weeks in Enfield, Cambridge, Redcar, St Helens and Newcastle upon Tyne. Nine more openings are planned for 2003, including branches in Port Talbot, Barrow, Barnsley and Bristol. The business still only has three stores in the South-east but would like to open more if it can secure planning permission.

Morrisons market share has risen from 5.6 per cent to 5.9 per cent over the past year. One negative factor was an 18 per cent rise in overheads due partly to more in-house distribution. But the dividend was increased by 25 per cent to 0.45p.

The company said Sir Ken Morrison, the company's chairman, has no intention of retiring even though he is a month away from his 71st birthday.

Credit Suisse First Boston changed its stance on the shares, which jumped 15.5p to 218.5p yesterday, from "outperform" to "neutral" saying the shares had already outperformed the FTSE All Share index by 20 per cent over the past three months. Merrill Lynch issued a "buy" recommendation saying the shares were a safe haven.