Morrisons hurt by Safeway slump :: Namibia Internet Gateway cc ::

Articles: Morrisons hurt by Safeway slump

Posted by admin on Friday, July 02, 2004 - 03:07 AM

Shares in supermarket group Morrisons have dropped sharply after it warned that poor sales at its newly-acquired Safeway business would hit profits.
The group said same-store sales at Safeway stores were down 7.2% for the current financial year, though sales at Morrisons branded stores were up 9.2%. Safeway has been cutting prices to try to win back custom, but sales volumes have been slow to pick up. Bradford-based Morrisons completed its £3bn takeover of Safeway in March. "It is likely that reported full year profits for the current year will be substantially lower than current market expectations," Morrisons said. The profit warning hit Morrisons' shares, which were trading down 31.25 pence, or 13.9%, at 194p by 0911 GMT. Culture clash Morrisons chairman Sir Ken Morrison admitted the firm had found the culture at Safeway to be different to that at Morrisons. "We're northern based and we have a unique northern character, we're very cost conscious and we work very hard, " Sir Ken told BBC Radio 4's Today programme. "I think that when this culture is throughout the Safeway business we'll see a big change in results." He denied that Morrisons had bitten off more than it could chew by buying Safeway. "I think it's a great long-term opportunity for us, we've got the team to handle it, and I'm sure success is just around the corner." Store revamp Morrisons said that originally it had not intended to change strategy at Safeway for a few months after taking over the business. However, it said that when it took control, sales were falling fast so it was forced into introducing price cuts to keep Safeway competitive. Morrisons added that a recent advertising campaign had helped to stabilise sales at the Safeway stores. It also noted that the first four conversions of Safeway stores to the Morrisons format had been a resounding success, with sales at these outlets up by an average of 36.8% on the same period last year. The main conversion programme of Safeway stores will start in August, Morrisons said, at the rate of three stores a week. By the end of November, a total of 53 stores are due to have been rebranded.

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