May 30, 2012 / 4:32 PM / 5 years ago

Morrisons sees no let-up in consumer squeeze

* Says shoppers using savings to pay bills

* Sees no respite for consumer for a year

* Focus of space growth will be south of England

* Still mulling entry into online food

* Shares up 0.6 percent

By James Davey

TUNBRIDGE WELLS, England, May 30 (Reuters) - Britain’s fourth biggest grocer Wm Morrison Supermarkets said consumers are finding the economic environment so severe they are having to use savings to pay monthly bills, are skipping meals and are hiding treats from their children.

“Overall it’s very very tough and I don’t see any respite for a year or so,” Chief Executive Dalton Philips told reporters on Wednesday.

His gloomy prognosis is bad news for a UK economy which tipped back into recession in the first quarter and is heavily reliant on consumers to drive growth.

Shoppers are being squeezed by rising prices, meagre wage growth and government austerity measures that show no sign of abating.

“The stories we get from our customers now - (they are) still buying biscuits but hiding them to a greater extent, recycling of clothes, passing clothes down, one in five mothers skipping meals,” said Philips during a media trip to Morrisons’s new store in Tunbridge Wells, 50 miles (80 km) south east of London.

“People are on really tight budgets, 43 percent of our customers are now dipping into their savings to make their monthly bills,” he said.

Earlier this month Morrisons posted a 1 percent fall in underlying first quarter sales.

The CEO reiterated that the retailer would sit back from a wave of promotional vouchers sweeping the industry.

“We’re very focused on providing great pricing but we’re not going to do crazy stuff,” he said.

Philips did, however, say he expected consumers to spend more this summer on the back of celebrations to mark the Queen Elizabeth’s Diamond Jubilee, the Euro soccer championships and the London Olympics.

And he noted that trading last weekend, when the nation was basked in sunshine, was “massive”.

PUSHING SOUTH

Morrisons, based in Bradford in northern England, is targeting opening 2.5 million square feet of new space over the three years to 2013/14. It opened a net 643,000 in 2011/12.

The Tunbridge Wells store, which showcases Morrisons’s “Fresh Format”, forms part of its strategy to accelerate growth in the south of England where it it under represented compared with rivals, such as industry leader Tesco and No. 3 player J Sainsbury.

The next three years will see a step-change in Morrisons’ southern presence bringing another 2 million UK households within a 15 minute drive of one of its stores.

Property Director Terry Hartwell said 60 percent of the firm’s new space in 2013/14 will be in the south.

Philips said a decision on whether Morrisons would enter a British online grocery market worth 6 billion pounds ($9.3 billion) a year will not be made until next year.

“If we do it we’ll do it at the end of next year and we’ll only do it if we can do it profitably,” he said.

“I feel encouraged but it’s still too early to be definite about it.”

Shares in Morrisons closed up 0.6 percent at 275 pence, valuing the business at 6.8 billion pounds.

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below