Shares in Morrisons pushed ahead yesterday despite the revelation of another big drop in sales as it grappled with “intense” competition in the sector.
The fourth-biggest UK supermarket chain admitted its recovery will take time after posting a 6.3% drop in like-for-like sales in the 13 weeks to November 2.
The fall, which excludes new store openings and fuel sales, comes as the big supermarkets face intense competition from discounters.
Discount chains Lidl and Aldi are eating into their market share, and yesterday Danish discounter Netto announced a return to the UK in a joint venture with Sainsbury’s.
The Morrisons figure was better than the 7.4% fall reported for the previous six months, and chief executive Dalton Philips was encouraged by the progress of initiatives designed to help the chain recapture market share.
In March the company announced an investment of £1 billion in price cuts over three years, and in June it announced 2,600 job cuts.
The Bradford-based business also recently launched a new loyalty card scheme which promises to match prices at discounters.
There have been signs that the strategy is starting to pay off, with an improved sales trend.
Mr Philips said: “Morrisons are meeting the challenges created by a period of intense industry competition and structural change with quick and decisive action.”
Shares in Morrisons surged yesterday, ultimately closing up 6.22% or 10.1p at 172.5p, although the FTSE 100 stock is still down by a third this year as investors moved away from the big three listed supermarkets.
The company pointed to an improved trend in its key performance indicators, with the number of items per basket now down by 2.4% year-on-year significantly better than the 6.9% recorded at the start of this year.
Morrisons said an improving IT platform was helping it to better understand and serve customers, as well as drive cost out of the business.
Overall, profits for the year to February are now expected to be between £335 million and £365m, compared with its previous forecast of £325m to £375m.
David Alexander, a retail analyst at consultancy Conlumino, was sceptical that Morrisons can successfully reverse the downward sales.
He added: “Far from being a game-changer, Morrisons’ Match & More scheme misses the point by being precisely the kind of gimmicky, voucher-based operation that caused consumers to cast flirtatious glances at the discounters in the first place.”