Morrisons back in the green

Morrisons back in the green

Supermarket Morrisons bounced back into profit after posting its first quarterly sales growth for four years.

But the Bradford-based business warned its turnaround "will take time", as it struggles to reassert itself in an industry gripped in a fierce price war with discounters Aldi and Lidl.

It reported a pre-tax profit of £217m in the year to the end of January in line with forecasts, compared with a £792m loss a year ago after it made large writedowns across the value of its store estate.

The business also posted a 0.1% rise in like-for-like sales for the fourth quarter of the year, its first quarterly rise since 2012.

Across the year it said same-store sales declined by 2%, compared with a fall of 5.9% in 2014.

The supermarket's underlying profit fell to £242m, from £345m a year ago, after closing unprofitable supermarkets and selling off convenience store outlets.

During the period chief executive David Potts, who took over from the ousted Dalton Philips almost a year ago, made a number of changes as he bids to turn around the firm's fortunes.

Last month the Big Four grocer signed a deal with US online giant Amazon to supply fresh food to its customers.

It will sell hundreds of Morrisons' products through its food delivery service Amazon Pantry and its subscriber service Amazon Prime Now.

The country's fourth largest supermarket also cut the cost of more than 1,000 products in February, slashing the price of staples such as fruit and vegetables by an average of 19%.

Potts closed 21 unprofitable supermarkets in the period, and in September sold off 140 M local convenience businesses for £25m to turnaround specialist Greybull Capital.

Last year the firm also axed around 700 jobs at its head office as it cut back on costs.

The moves saw the chain this month selected to re-enter the prestigious FTSE 100 Index of the country's biggest firms, after being forced out three months earlier.

But Potts said it would take time to fix the business, adding there was "a great deal more to do".

He added: "By improving the shopping trip for customers, we have started the journey to turn around the business and make our supermarkets strong."

Potts said he would continue to make the business leaner, and had targeted £1.1bn of property disposals over three years.

Figures from respected research group Kantar Worldpanel published earlier this week said Morrisons' sales fell 3.2% in the 12 weeks to February 28 compared with the same period a year earlier, while Sainsbury's managed growth of 0.5%.

Tesco's overall sales fell by 0.8% in the period, halving last period's decline of 1.6%, after a renewed focus on price promotions, according to Kantar.

Steve Clayton, head of equity research at broker Hargreaves Lansdown, said: "Morrisons is still a work in progress, but the company appears to be heading in the right direction.

"Morrisons is firmly in the sights of Aldi and Lidl and if it is to repel their threat, its value focus must be relentless."