Morrison sluggish as hard times bite

WM MORRISON supermarkets said yesterday it expected shoppers to remain under pressure into the second half of next year, as it met forecasts with a 1.3 per cent rise in third-quarter underlying sales.

However, the fourth-biggest grocer played down fears of a surge in food prices, saying it did not see big inflationary pressures and consumers were offsetting the impact of rising prices by buying more goods on promotion.

Britain’s retailers are worried that tax hikes and public spending cuts aimed at reducing government borrowing could hit spending in the coming months, and that they might struggle to pass on rising input prices to cash-strapped shoppers.

“We think through until really the second half of 2011, people will be very focused on value,” finance director Richard Pennycook said.

Morrison’s, which runs over 430 stores and, unlike major rivals, produces much of the food it sells, said sales at stores open over a year rose 1.3 per cent, excluding petrol and VAT sales tax, in the 13 weeks to 31 October – its fiscal third quarter.

That was up from one per cent in the second quarter, helped by a small increase in food prices, and compares with analysts’ average forecast of 1.4 per cent in a Reuters poll of 11.

“We had hoped for a bit more than that ... Morrison’s will need to do better in the key fourth quarter to meet our second-half forecast of over two per cent like-for-like sales growth,” said Arden Partners analyst Nick Bubb. Morrison is locked in a battle for market share with rivals including Tesco and Asda.