First decline at Morrisons since 2005

Morrisons has suffered its first fall in underlying sales for nearly seven years, which the grocer blamed on a blitz of discounting coupons from rivals and the impact of higher petrol prices on household budgets.

Wm Morrison chief executive Dalton Philips also said there had been a further deterioration in consumer spending, although he added that London and the South-East remained the “fastest growing” region for the UK’s fourth-biggest grocer.

The Bradford-based supermarket posted a 1% fall in like-for-like sales, excluding fuel, over the 13 weeks to April 29. This was its first decline in underlying revenues since the autumn of 2005 after its troubled acquisition of Safeway in 2004. Philips said the grocery market was “extremely competitive” but said that Morrisons would focus on “growing at a measured rate” and would not get drawn into “irrational” discounting.

Philips added that “our largest competitor” — Tesco — had issued promotional vouchers for eight of the past 13 weeks. However, the weak performance at Morrisons seems to suggest that Tesco’s aggressive promotional activity is starting to hurt its smaller rival.

Philips also believes there has been a further step down in consumer spending recently, with soaring petrol prices hitting families the hardest. He said: “It has got even tougher. Fuel is clearly the biggest one at the moment. The average family with two cars is paying £26 more a month on fuel than they were before [this time last year].”

Philips said the decline in sales was due, in part, to Morrisons being up against strong comparable sales in the same period last year, but it appears also to have lost market share against its rivals recently.

According to Kantar Worldpanel, Morrisons grew sales by 3.6% over the 12 weeks to 15 April — behind Tesco’s 4.2%, Sainsbury’s 5.4% and Asda’s 8.3% growth.

Richard Hunter, analyst at Hargreaves Lansdown Stockbrokers, said: “Morrisons continues to underwhelm in the face of tough trading conditions.”

Flu sales still fly

Morrisons today followed the fashion chain Next in detailing how the wettest April for more than 100 years has affected trading. Despite the end of the winter, the grocer said it was shifting as many cold and flu remedies as it was products for pollen allergies. Chief executive Dalton Philips said it was “unheard” of to be selling so many flu products at this time of year, as sales normally drop off as the country enters the pollen season. Unsurprisingly, sales of umbrellas at Morrisons rocketed by 1400% last week.