Morrisons to keep slashing supermarket costs after prices tumble 5.3%

Morrisons, Britain’s No. 4 supermarket group, reported another fall in quarterly underlying sales, hurt by the deflating effect of its own price cuts.

Morrisons has seen a fall of 2.6% in sales in the three months to 1 November.

It said price deflation was -2.2 percent in the quarter, while reducing its reliance on voucher prmotions impacted like-for-like sales by 2.4 percent, creating a headwind of 4.6 percent.

After announcing the closure of 11 supermarkets and sale of 140 M local stores, the net growth of new sales space was predicted at about 0.5% for 2015/16. “Our needs for the rest of the year are unaltered – to balance out trading, lessen expenses and further enhance the ability of the headship team”. Potts put on a fearless face though, saying the supermarket was ‘making good progress in many areas, ‘ and that customers were sitting up and taking notice.

Sales continue to fall at troubled supermarket Morrisons – but the new team headed by David Potts are putting a fearless face on the turnaround process.

Morrisons said sales were lower in Q3 as a result of its move to cut back on vouchers in favour of lower prices in store.

But the business said it was improving the shopping trip with “customer satisfaction scores” materially ahead of a year ago. No wonder its share price also tanked, down (see?) 3.5% to 171.2p this morning.

John Ibbotson of consultancy Retail Vision said the supermarket was “delusional” to believe it was making progress, given the poor third quarter figures. Year-end net debt will be lower than a previous forecast of 1.9 billion pounds ($2.9 billion) to 2.1 billion pounds, the company also said, citing working capital improvements and faster than expected property disposals. Only question is, who will buy it? This was a slightly larger drop than the City had been expecting and shows the intense competition that Morrisons is facing as it tries to turn around its business.

But analysts at Jefferies said a “stronger Morrisons is emerging”, with recovery efforts paying off by improving the customer experience.