The latest trading figures from Morrisons show that the supermarket giant is feeling the squeeze in the price war raging between the “big four.” The Bradford based retailer followed Tesco by reporting negative sales figures in its commercial properties for the first time since 2005 as consumer spending power continues to fall.
The figures posted by Morrisons show that like-for-like sales fell by 1% in the thirteen weeks up to April 29. Chief Executive, Dalton Philips insists he is “satisfied” with the results which he blames on falls in customers disposable income and the cost of the fuel price rises earlier in the year.
He also points out that the corresponding figures for 2011 were distorted by factors including the exceptionally warm Easter and the Royal Wedding which led to a bumper quarter.
However Shore Capital analyst Clive Black described the trading figures as “disappointing” and explained that, taking inflation into account, sales at Morrisons commercial properties are potentially down by as much as 5%.
Morrisons has traditionally been a solid performer but it appears that they are the latest victim in the battle between the leading supermarket chains. While Tesco, Sainsbury’s and Asda have escalated their promotions and vouchers, Morrisons has concentrated on keeping prices low throughout its commercial properties.
However, Asda is outperforming Morrisons in this respect while other retailers like Lidl could turn out to be the real winners as more and more shoppers search for bargains as the recession continues to bite.
According to Clive Black, Morrisons is also missing out because of a lack of convenience commercial properties and by not providing an internet home delivery service. He said this means the retailer has “virtually no access to the few areas of growth in the market.”
In a statement Morrisons said; “As expected, the economic environment for the consumer has remained challenging, with the high price of oil and other commodity prices putting pressure on disposable incomes.” Following the announcement Morrisons shares closed 3.5p down at 276.5p, a fall of 1%.
Tesco also recently posted negative trading figures, reporting a 1% fall in profits in the year to the end of February. This prompted a pledge from Chief Executive, Philip Clarke to overhaul the business and increase the staff levels in its commercial properties.
He said; “We fully recognize that we need to raise our game in the UK. As we improve the shopping trip for our customers, it will follow that our sales growth and financial performance will improve too.”
The price war between the big four looks set to intensify following Asda’s announcement that it is slashing petrol prices by 2p per litre at its 195 commercial property forecourts. The latest cut means that fuel prices have dropped by 4p per litre at Asda over the last three weeks.
Sainsbury’s and Tesco both responded by doing the same. However this is against the background of the 48% increase in petrol prices since 2009. This means that a return journey between Liverpool and London now costs motorists £78 in fuel. With prices like this perhaps it isn’t surprising that consumers have been spending less in supermarkets.
