Morrisons: more price cuts, ahead of results

The retailer and food manufacturer has cut the price of 847 basic items, including: bread, biscuits and tea bags.

Morrisons said in a statement: “The cuts average 20% and focus on grocery items that are a core part of Morrisons shoppers’ baskets such as bags of sugar, rice, and cereals.” ​

The reductions are part of the retailer’s ‘Price Crunch’ initiative – a rolling programme of lower prices, lasting a minimum of three months.

Warburtons free-from​

The cuts included: Hovis Good Inside Wholemeat, 800g, reducing from £1.20 to £1, Morrisons chicken thighs, 750g, falling in price from £2.25 to £1.94 and Warburtons free-from white sandwich thins, reducing from £2.20 to £1.80.

Morrisons marketing and customer director Andy Atkinson said: “We continue to listen hard to customers who say they want lower prices on staples and everyday family essentials. ​

“We are continuing to cut every price we can as we make Morrisons even more competitive and improve our customers’ shopping trip.”​

Commenting before the price cuts were announced, City analyst Shore Capital predicted the retailer’s results later this week would reveal “a further quarter of sound progress”.​

‘Sound progress’​

The quarter will include a series of normally sales-boosting events, such as Valentine’s Day, Mothers’ Day, Easter and the build up to a chilly May Day Bank Holiday.

Shore Capital predicted improving underlying sales momentum at Morrisons, following the 0.1% increase, reported for the fourth quarter of financial year 2016.

Like-for-like sales were expected to remain flat – showing a rise or fall of about 0.5%. “Within this figure, we expect deflation of about 2.5–3%, as price investment continues, implying volume growth of 2.5–3%; important progress in a vertically integrated group,” ​said Shore Capital analysts Clive Black and Darren Shirley.

The retailer’s strong balance sheet was an important factor underpinning its future prospects as an equity investment, they added.

“Management is demonstrably sweating its retail assets and if progress can be sustained then there is every reason to believe that sales and cash densities from its stores will rise and so a downward trend of falling RoCE​ [return on capital employed] can be reversed.”​

But they added: “There is more water to flow under the bridge before we can be too assertive about future prospects. But there is the potential to our minds that ongoing progress could lead to the board considering more shareholder-friendly initiatives in due course.”​

The analysts predicted Morrisons would return to dividend growth in the financial year 2017.

The retailer was due to report interim results on the September 15 2016.