Shares in supermarket chain Morrisons tumbled today (March 12th) after the company announced a huge drop in pre-tax profits for the past year.
Morrisons' share price fell almost 11 points in opening trading before rebounding slightly to 204.60 as investors came to terms with the hugely disappointing figures. The supermarket revealed pre-tax profits to be down 52 per cent to £345 million for the past 12 months. It signifies the company's worst results in eight years and presents a formidable challenge for new chief executive David Potts.
Mr Potts will replace Dalton Phillips, who announced an end to his five-year tenure in January, on March 16th. Morrisons has a number of obstacles to overcome if it is to keep pace in the highly competitive supermarket sector. Discounters such as Aldi and Lidl have put considerable pressure on the traditional 'big four' with Morrisons, Tesco, Asda and Sainsbury's all feeling the heat.
Despite the poor results, Andrew Higginson, Morrisons' chairman, was positive about the future: "Last year’s trading environment was tough, and we don’t expect any change this year.
"However, Morrisons is a strong, distinctive business – we own most of our supermarkets, have strong cash flow, and are famous with customers for great quality fresh food at low prices. This gives us a good platform."
One of the key reasons for Morrisons falling behind its rivals has been its slow uptake in new areas of commerce such as online grocery shopping and convenience stores. The company had planned to open more M stores in the coming year, but the results have meant this process will have to be "slowed significantly".
In addition, it stated that it would be closing 23 M local stores over the next 12 months which will result in the loss of 380 jobs.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.