Morrison Says First-Half Pretax Profit Gains on Price Discounts, Savings

William Morrison Supermarkets Plc, the smallest of the U.K.’s four main grocers, said first-half profit rose as discounts brought in more customers and the retailer saved money on distribution and purchasing.

Underlying pretax profit climbed 14 percent to 410 million pounds ($633 million), the Bradford, England-based company said today in a statement. That compared with the 408 million-pound average estimate of 14 analysts compiled by Bloomberg.

“Our first-half performance has been solid, in a tight market,” Chairman Ian Gibson said in the statement. “Our new Chief Executive Officer, Dalton Philips, has made a great start in the business and with the leadership team is developing positive plans for the next phase of growth.”

Morrison said it expects “low market growth to continue in the second half of the year, with further pressure on the consumer.” The company sees a “slight rise” in prices due to commodity price pressures, and expects to report profit in line with its own expectations for the year.

“There are many opportunities ahead to drive our top line, increase efficiencies in the business and to capture growth,” according to Philips, the former chief operating officer of Canada’s Loblaw Cos., who was commenting on plans for the company for the first time since he joined on March 29.

Net income in the six months ended Aug. 1 fell to 286 million pounds from 309 million pounds a year earlier, when earnings were helped by a one-time pensions credit of 91 million pounds. So-called total comprehensive net income was 280 million pounds compared with 307 million pounds a year earlier.

‘Strategy Evolution’

Revenue rose 9.1 percent to 8.1 billion pounds, with sales at stores open at least a year up 0.9 percent, excluding gasoline and value-added tax.

“We would expect strategy evolution rather than revolution,” Andrew Kasoulis, an analyst at Credit Suisse, said in a note before the release. “There is still plenty of margin upside potential.” Kasoulis rates Morrison “outperform.”

Morrison rose 1.5 pence, or 0.5 percent, to 292.5 pence in London trading yesterday. The stock has risen 5.4 percent this year, while the five-member FTSE 350 Food & Drug Retailers Index is little changed. Two-thirds of 33 analysts tracked by Bloomberg rate the shares “buy,” with only one “sell.”

To contact the reporter on this story: Clementine Fletcher in London at cfletcher5@bloomberg.net.

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