Morrisons to close 11 more stores as profits continue to fall

Bradford-based supermarket chain Morrisons is expected to close upto 11 stores as sales and profits are still in recovery mode.

In the first half of 2015, the supermarket chain’s total turnover was £8.1bn, which is down 5.1% compared to the same period last year.

Store turnover also saw a decrease of 1.1% to of £6.4bn, which comprised a like-for-like decrease of 2.7% (including a contribution of 1.0% from online) and 1.6% from new stores.

Fuel sales fell by 16.8% to £1.6bn, with deflation again a key feature as lower oil prices were passed on to customers.

At the half yearly point, underlying operating profit was recorded at £163m, with operating margin down 67bps year-on-year to 2.0%.

Morrisons’ underlying profit total takes into account restructuring costs and new business development costs. Restructuring costs were £24m, primarily comprising head office restructuring (2014/15: £35m). This was part of the £30m-£40m 2015/16 restructuring costs which were announced at the time of the first quarter trading update in May. New business development (NBD) losses for online and convenience were £30m (2014/15: £38m).

Operating profit is also expected to continue to fall due to the proposed closure of 11 further stores, which will incur a restructuring cost of £20m.

A significant drop was also seen in the supermarket chain’s underlying profit before tax, which was reported at £117m (2014/15: £181m). Reported pre-tax profit , after £9m net profit on property, was £126m (2014/15: £239m).

Capital expenditure fell to £139m, from £257m for 2014/15, with cuts in all areas, in particular new store openings.This resulted in the supermarket chain reporting a fall in group net debt to £2,086m - from £2,340m at the end of 2014/15, and is down over £500m from the same time last year.

Morrisons only opened one new supermarket (26,000 sq ft) and five M locals (14,000 sq ft) during this time. As previously reported, the supermarket closed ten smaller supermarkets and 23 M locals. The impact was a reduction of 94,000 square feet in net new space.

David Potts, Chief Executive, said: “Since joining Morrisons, I have been struck by the passion and commitment of all our colleagues, and I want to thank them for their continued good work. Our colleagues have the key role in delivering an improved shopping trip for customers both in stores and online.

“Morrisons will be an organisation that listens. During the first half, the new Executive and leadership teams have been listening hard to colleagues, customers, suppliers and shareholders. They tell us there is a lot for us to do.

“The immediate priority is to deliver a better shopping trip to stabilise trading performance. Our six strategic priorities will then deliver improvement in the core supermarkets, where we have the greatest opportunity.

“It will be a long journey. We approach the challenge with energy, confidence and many strengths, particularly our strong balance sheet and cash flow, which enables investment in improving the customer shopping trip.”