The supermarket says sales in stores open for more than a year fell 1.6 per cent in the 26 weeks to August 4, compared with a 0.9 per cent drop a year ago. Underlying profits were down 10 per cent to £401m.
Morrisons has made a focus on fresh, high-quality food a priority with a high-profile ad campaign explaining how its fish and meat is sourced in the UK and prepared in stores. Given the horse meat scandal and hot summer weather, this should have left Morrisons well placed to capitalise on demand for fresh products such as sausages and burgers.
But analysts believe the supermarket left it too late to highlight this point of difference, while its focus on fresh food is coming at the expense of its core brand identity of good value food.
Retail research agency Conlumino says: “An emphasis on fresh, high-quality food is important, but this must not come at the expense of value. Its decision to stock gourmet food items risks confusing and alienating its customer base.
“It must be careful not to lose sight of its brand identity.”
Nevertheless, Morrisons is continuing plans to roll out its “Fresh” format to more stores. It is already in 169 branches, equal to a third of its estate and 43 per cent of sales, and should be in 200 by the end of the year.
Alongside that, the supermarket is investing in its own brand products to make them a range that customers believe is “worth switching supermarkets for”. Plus its plans to expand to 100 convenience stores this year are on track and its online service with partner Ocado, which reported a sales increase of 16.4 per cent for the 12 weeks to August 11, is set to launch in January 2014.
Morrisons will also hope that a new deal to sponsor ITV’s annual charity fundraising programme, Text Santa, will boost its brand. The deal will see Morrisons replace Asda as an appeal partner, helping to raise money in store and selling exclusive merchandise.
Elsewhere in the retail market, Waitrose is crediting innovative marketing for its quickening pace of growth. Like-for-like sales for the half year ended July 27 were up 6.9 per cent, an improvement on 2.2 per cent a year ago.
It also continues to outperform the rest of the market, with its share of the supermarket sector now standing at 4.9 per cent, up from 0.3 per cent a year ago. This against the backdrop of a competitive trading environment, with a commitment to value through its brand price match and the growth of convenience and online underpinning its success.