Morrisons shrugs off consumer Brexit woes to hike profits

Supermarket Morrisons has posted a hike in annual underlying profits despite a slowdown in retail sales as Brexit uncertainty knocked shoppers’ confidence.

The UK’s fourth biggest supermarket reported an 8.6% rise in underlying pre-tax profits to £406 million for the year to February 3.

The chain saw like-for-like retail sales growth slow to 0.6% in the final three months, down from 1.3% in the third quarter.

But like-for-like sales overall rose 3.8% in the fourth quarter thanks to a 3.2% contribution from the wholesale division, which includes tie-ups with McColl’s and Amazon.

Its results showed that, on a statutory basis, pre-tax profits fell 15.8% to £320 million after exceptional costs.

Chief executive David Potts said the group saw a much more “challenging autumn as consumers were more cautious in more uncertain times”.

But he said the group’s turnaround was “well on track” and added that it responded quickly to the shift in consumer sentiment in the autumn as Brexit uncertainty took its toll.

He said 2018 “ended well” as a result.

Shares in Morrisons fell 1% despite the group announcing a special dividend of 4p a share, helping to boost its full-year investor payouts by 25%.

Morrisons said full-year comparable sales lifted 4.8%, up from 2.8% in the previous year, as its wholesale deals provided a boost.

The group said it was expecting to supply McColl’s remaining 300 or so convenience stores towards the end of 2019.

It is also trialling converting 10 McColl’s stores to Morrisons Daily convenience stores.

Last week, the group also brought the Safeway brand back to the high street for the first time since 2005, with two Safeway Daily stores opened in partnership with MPK Garages.

Morrisons said it had achieved its target of £700 million in annualised wholesale supply sales ahead of its end-of-2018 target and is sticking to aims to increase this to £1 billion in “due course”.

Mr Potts said the group will continue to open a “handful” of new stores each year.

But the chain was dealt a blow recently when the competition watchdog left the £12 billion mega-merger between rivals Sainsbury’s and
Asda on the brink of collapse, hitting Morrisons’ prospects of snapping up offloaded stores.

Retail expert Clive Black, at Shore Capital, said Morrisons had notched up “further notable financial progress under the tutelage of chief executive David Potts”.

He added it was “no mean feat” in a turbulent year for retail.