LONDON: Britain’s No.4 grocer Wm Morrison said it would not join the wave of profit-squeezing promotions sweeping the industry, even though its decision to stand back contributed to the first fall in its quarterly underlying sales since 2005.
“We are prepared to sit back from this activity rather than pursue small market share gains at any cost,” chief executive Dalton Philips told reporters on Thursday.
“You can pile in and you can blow your brains out and you can drive your top line but it doesn’t necessarily do anything for your bottom line.”
Tesco Britain’s biggest retailer, has stepped up promotions and vouchers as it seeks to fight back from a shock profit warning in January, while rivals like Wal-Mart’s Asda and J Sainsbury have largely followed suit.
Retailers across much of Europe are struggling as shoppers grapple with higher prices, muted wage growth and government austerity measures, and worry about job security, shaky housing markets and fallout from the euro zone debt crisis.
Also on Thursday, German retailer Metro posted a surprise first-quarter loss, while Belgium’s Delhaize warned 2012 profits would fall.
RELIEF IT WASN’T WORSE
Morrisons said sales at stores open over a year fell 1.0 percent excluding fuel in the 13 weeks to April 29, its fiscal first quarter.
That was bang in line with analysts’ average forecast, according to a company poll, and compared with a fourth quarter rise of 0.7 percent. Total sales, excluding fuel, rose 1.5 percent.
The fall in underlying sales partly reflected a tough comparison with strong trading in the same period last year when like-for-like sales rose 2.5 percent as spending was boosted by an exceptionally warm Easter and celebrations surrounding a royal wedding.
“The economic environment for the consumer has remained challenging, with the high price of oil and other commodity prices putting pressure on disposable incomes,” said Morrisons.
The firm maintained its outlook for the year, adding it was confident of achieving continued profitable growth.
“There is some relief today that the outcome was no worse ... and that management have not changed their full-year profit guidance,” said independent retail analyst Nick Bubb.
At 0825 GMT, Morrisons shares, down 6 percent over the last month, were up 0.9 percent at 282.5 pence, valuing the business at 7.02 billion pounds ($11.4 billion)
Data last week showed Britain is back in recession, prompting fears of a fresh fall in consumer confidence, while high oil prices have raised doubts about whether inflation will continue to fall back from last year’s highs.
As well as modernising its core chain, Morrisons, which runs nearly 500 superstores and, unlike rivals, produces much of the food it sells, has been diversifying into non-food, e-commerce and M local convenience stores.
Morrisons sales fall as shuns profit-hitting deals
