Morrisons third quarter results: Sales fall again but chief executive David Potts remains upbeat
Sales continue to fall at troubled supermarket Morrisons – but the new team headed by David Potts are putting a brave face on the turnaround process.
The figures
In the 13 weeks to 1 November, total sales excluding fuel were down two per cent, while like-for-like sales dropped 2.6 per cent.
The supermarket, which is at the beginning of a turnaround, is keeping prices low. Deflation excluding fuel was 2.2 per cent and is 5.3 per cent on a two-year basis.
But Morrisons has managed to lower net debt to £2.1bn, and is now expected to come in lower than previous guidance suggested, with the supermarket estimating the full year debt to be between £1.9bn and £2.1bn.
Customer satisfaction scores were "materially ahead of last year".
Depreciation is now expected to be c.£390m for the year.
Why it's interesting
In September Morrisons revealed plummeting profits while new chief executive David Potts admitted the turnaround would be a "long journey". Today's figures certainly bear that out.
Morrisons will be struggling not only against its own internal issues but the external factors, particularly the supermarket price wars which are hurting all the Big Four.
But there are signs that improvements are having an impact: underlying profit before tax is expected to be higher in the second half of 2015/16 than the first.
What they said
Potts said: "The business is moving at pace on the long journey towards improving the shopping trip for customers. Our priorities for the rest of the year are unchanged – to stabilise trading, reduce costs and further improve the capability of the leadership team. We are making good progress in many areas and customers are noticing improvements."
However that wasn't enough to convince everyone.
John Ibbotson of consultancy Retail Vision said: "To claim you are making good progress on the back of these numbers is bordering on the delusional.
"David Potts has been in charge for nine months now but his turnaround plan isn’t working. He can't blame it all on food deflation, either, because that's happening to all the supermarkets.
"In fairness, Potts is doing as well as anyone probably could but he has arguably received one of the biggest hospital passes in UK retail history. It's hard to see Morrisons ever making a full recovery, and it’s potentially ripe for takeover. Only question is, who will buy it?
"Morrisons is entering the critical Christmas period in near critical condition."
In short
Morrisons management is saying all the right things but it's too early to be convinced just yet.