SUPERMARKET Morrisons has scaled back plans for new store space as it gears up for the long-awaited launch of an internet shopping business.
The UK’s fourth-biggest grocery chain is battling to revitalise its business after underlying sales fell 0.9% in the six months to July 29, triggering a £9m drop in profits to £440m.
With chief executive Dalton Philips forecasting no let-up in challenging trading conditions, Morrisons will look to save £100m a year by reducing its target for new store space by a third over the next two years.
It will focus expansion on new stores in the South of England – where it is currently under represented – including its first ’M local’ convenience stores in London.
The company is also taking its first steps into online grocery, starting with a new Morrisons Cellar wine range later in this financial year.
Morrisons is a late entrant to the online shopping market and has just sent a team to New York in order to learn from US food delivery business Fresh Direct, in which it acquired a 10% stake last year.
Its bid to win back market share has also seen the launch of a system of personalised vouchers for shoppers as it looks to compete with Tesco’s discount-fuelled fightback. The retailer is also rolling out more stores with an increased focus on its fresh food offer.
Shares rose 5% yesterday as underlying profits improved 1% to £445m, helped by cost savings and efficiency measures and defying City expectations of a fall.
Chairman Sir Ian Gibson said: “With ongoing commodity inflation continuing to weigh on already fragile consumer confidence and market conditions becoming ever more challenging, we have had to work even harder for our customers during the first half.”
The group is the only one of the 'big four' supermarket chains not to deliver groceries, but it bought the Kiddicare online clothing business last year as it dipped its toes into the online market for the first time.
The Kiddicare distribution centre in Peterborough will be used for the new wine business and the move will ramp up speculation that it plans to broaden its online offer.
Morrisons highlighted the competitive nature of the grocery market as shoppers put fewer items in their shopping baskets and sought to avoid wasting food.
But its own-label products have benefited as customers switched from big-name brands, with Morrisons gaining share in 63% of categories, compared to 46% a year ago. Its value own- label ranges grew at 13%.
With the cost of petrol adding £6 to an average family’s monthly transport costs, its Fuel Britannia promotions attracted record numbers of drivers to its forecourts, sparking a 2.5% rise in volumes.
Morrisons’ shares were up 3% as investors approved of the plans to lower spending on new space.