Morrisons feels heat from Safeway problems
Supermarket group Morrisons warned of further profits disappointment today after continuing to experience problems integrating its Safeway acquisition.
Morrisons said annual profits before tax and one-off items would now be in the range of £320m (€460.6m) and £330m (€475m) – about £30m (€43.2m) to £40m (€57.6m) lower than analysts had expected after its Christmas trading update.
The Bradford-based group, which acquired Safeway last year, said the shortfall followed “issues encountered with the Safeway accounting systems”. It is the second time in less than a year that Morrisons has warned on profits.
Shares in Morrisons slumped 6% – down 13p to 199p – following the update.
Morrisons said no further comment would be made until its full-year results next week, when it will give an update on the outlook for the current financial year, including the Safeway conversion process “in an increasingly competitive marketplace”.
Mike Tattersall at broker Cazenove said more detail was needed, but added: “It does not suggest to us the company is losing faith in the medium to long-term prospects for the business.”
Morrisons has been converting Safeway stores to its own format since acquiring the chain last year.
Although sales at the original Safeway stores have continued to decline, the group has reported “encouraging” progress at those sites converted to the Morrisons format.
In a statement in January it said festive trading had been fairly tough with its core stores hit by factors including competitors opening new sites and shoppers moving to newly converted Safeway stores.
It also said at the time that Safeway sales were 9.1% lower in the year to date but like-for-like sales at Morrisons stores were 5% higher.
Morrisons acquired Safeway for £3bn (€4.3bn) in March of last year, following an intense one-year battle involving a number of other chains. It issued its first profits warning in July.
