Britain's fourth-biggest grocer, Morrisons, has reported a 10% drop in half year profits as it lagged behind its rivals in the key online and convenience markets.
Morrisons entered into a 25-year agreement with Ocado in May to give it access to the online market. However, the fact that its rivals already operate established e-commerce sites has severely hampered Morrisons growth.
Morrisons currently has an ambitious expansion programme, opening its M Local convenience stores across the UK, with a target of 100 by the end of the year and 200 by the end of 2014.
In the first half of the year to August 4th, the company made an underlying pre-tax profit of £401 million compared to £445 million last year.
However, the company remained confident, saying: “We anticipate an improvement in our sales performance during the second half and accordingly the board believes the group's performance for the full year will be broadly in line with its previous expectations. Our strategic initiatives are laying the foundations for good progress in the year to January 2015 and beyond.”
Dalton Philips, chief executive, said: "Our strategy for growth in convenience and online is now set. Today we are outlining our financial strategy, which will support our key financial objectives of growing underlying earnings, generating cash and delivering superior total shareholder returns.
“This is against an economic backdrop which remains difficult for the consumer, but where our relentless focus on providing great value and quality to our customers and improving the way we communicate Morrisons unique points of difference, have been reflected in a steady improvement in our like-for-like sales performance.
“We have also made significant progress in building our presence in the key growth channels of convenience and online. By the end of the year we will have 100 M Local convenience stores, around half of which will be in London and the South East, and we've secured a new distribution centre in Bury to support our convenience stores in the North. In parallel we've been working at pace on our online offer; the final pillar of our strategy. Morrisons.com will be making home deliveries of our great fresh food by the end of January 2014, supported through our long term service agreement with Ocado."
