Morrisons makes online move as sales dip

Morrisons is to expand its M Local convenience store network and make its first move into online grocery shopping, two of a raft measures introduced to revive flagging sales.

morrisons

The supermarket, the UK’s fourth largest by share, says sales from stores open for a year or more dipped 0.9% in the six months to 29 July. Pre-tax profit slipped to £440m, from £449m a year earlier.

Chief executive Dalton Phillips blamed “sustained pressure on consumer spending” for the first-half drop.

Morrisons’ sales growth has lagged behind nearest rivals Sainsbury’s and Asda, according to Kantar data. Analysts have blamed its lack of convenience stores and the slow progress it has made in expanding its multi-channel operations for the performance.

To counter this, the supermarket chain announced it would be opening 15 more M Local smaller format outlets in the second-half. This, it adds, would be a “a prelude to accelerating the rollout programme in 2013/14”.

Growing its convenience store network in London was identified as a priority. To this end, it was announced that a 100,000 square foot distribution centre would be built in West London to service the expansion.

Elsewhere, Morrisons will make its first foray into online grocery retailing with the launch of a wine site, Morrisons Cellar. It adds that it continues to “evaluate opportunities to develop a unique and profitable online food model in the UK”.

A further 38 shops will be converted to “Fresh Format” in the second-half, taking the total 100. The format features an new design produce sections and counters and an expanded fresh food offer.

Phillips predicts the convenience store, online and fresh format plans mean it will make “good progress” in the second-half. Expectations for full-year profit were unchanged.

Some analysts were unimpressed with the announcement. A research note from Shore Capital says that multi-channel operations “remain peripheral to Morrisons’ short to medium growth prospects” and that it still has concerns over the “trading momentum within the group”.

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