Morrisons’ sales recovery piles more pressure on the discounters

Morrisons’s half-year profits increased for the first time in four years but its CEO says recovery is “still in the foothills”.

Morrisons saw profits rise by 13.5% to £143m for the six months to 31 July, marking its first increase in half-year profits for four years.

Like-for-like sales, meanwhile, were up by 2% in the May to July quarter, representing the big four supermarket brands’ third straight quarter of growth.

Earlier this year, Morrisons’ CEO David Potts said marketing had played a “strong role” in the retailer’s ongoing turnaround, with ads from new agency Publicis focusing on price cuts, family tradition and the role of in-store food-making. And today (15 September), Potts said he is “pleased with the progress” Morrisons is making.

Read more: Morrisons boss: ‘Our marketing is helping boost sales and brand loyalty’

He says: “We are still in the foothills of our recovery programme. We have returned the business to core customers and sped up the business. We are pleased with progress so far and there is a lot more we can do and will do for customers and colleagues, but so far so good.”

Is this bad news for the discounters?

Morrisons’ strong sales performance comes after it cut prices twice in recent month, as it aims to win back customers lost to the cheaper discounters.

Earlier this month, Morrisons cut the prices of 160 everyday products by an average of 12%. And in August, it cut the prices of 1,000 products, including fresh produce staples, by 18%.

Although Asda continues to struggle and sales at Sainsbury’s remain relatively flat, the positive growth at Morrisons is mirrored by big four rival Tesco, which has now clocked up two successive quarters of like-for-like sales growth.

However, despite this compelling evidence of a turnaround for two of the big four grocers and many analysts claiming sales at Aldi and Lidl are slowing, the discounters remain defiant.

Earlier this month, Aldi’s marketing director Adam Zavalis told Marketing Week: “Things are not slowing down, it’s an exaggeration. In value terms we are growing faster than we did in 2011 and we are not seeing customers return to the big four either, it is quite the opposite. We have attracted 652,000 more customers over the past 12 weeks; Aldi is still going from strength to strength.”

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Morrisons says it is planning to complain about an additional Aldi ad to the ASA after the discounter today (June 28) saw two TV ads and a press ad banned by the advertising watchdog. Aldi, following a complaint from Morrisons, was told by the ASA it had ‘misleadingly’ compared a weekly shop of its own brand products with branded products at the big four supermarkets.

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