Morrison Q3 sales subdued

Friday, 5 November 2010 05:34 - - {{hitsCtrl.values.hits}}

London-LONDON (Reuters) - Wm Morrison Supermarkets (MRW.L) met forecasts with a modest rise in third-quarter underlying sales as the benefits from a small rise in food price inflation were held back by subdued consumer spending.

Britain’s fourth-biggest grocer said on Thursday sales at stores open over a year rose 1.3 percent, excluding petrol and VAT sales tax, in the 13 weeks ended October 31.

That was up from 1.0 percent in the second quarter and compares with analysts’ average forecast of 1.4 percent in a Reuters poll of 11.

“In a continuing difficult environment for the consumer, performance in the third quarter has been in line with our expectations. Accordingly our financial outlook for the year remains unchanged,” the firm said.

Morrison’s has outperformed sales growth at bigger rivals Tesco (TSCO.L) Asda (WMT.N) and J Sainsbury (SBRY.L) in recent years as it recovered from the botched acquisition of Safeway in 2004 and customers responded to its mix of low prices, fresh food counters and innovative promotions.

But it has recently slipped behind Sainsbury, hit by a steeper economic downturn in its heartlands in northern Britain and by a trend towards affordable luxury foods, which has favoured more premium players.

Some analysts are also concerned that Morrison’s lacks the diversity of its rivals, although new chief executive Dalton Philips announced plans in September to test convenience stores and selling over the internet next year.

Morrison’s shares have lagged the STOXX 600 European retail index .SXRP by 5 percent this year. They closed on Wednesday at 290 pence, valuing the firm at 7.8 billion pounds.