* Says uncertainty around imported food prices
* Also flags higher depreciation, pension, staff costs
* Underlying full-year profit rises for first time in five
(Adds CEO, analyst comment, shares)
By James Davey
LONDON, March 9 Morrisons, Britain's
fourth biggest supermarket chain, warned more expensive food
imports were creating uncertainties after a new management team
delivered a first rise in annual profit in five years.
Shares in Morrisons, which trails market leader Tesco
, Sainsbury's and Asda in annual sales,
fell as much as 6 percent after the group also flagged an
increase of up to 50 million pounds ($61 million) in
depreciation and pension costs in 2017-18. It also faces higher
"There are some uncertainties ahead, especially around the
impact on imported food prices if sterling stays at lower
levels," the company said on Thursday.
Morrisons said all the increased costs were incorporated
into its plan and it was confident its turnaround was on track.
However, the stock was down 12.7 pence at 234 pence at 1110
GMT, the cautious comments taking some of the shine off an
improved performance under Chief Executive David Potts.
Former Tesco executive Potts joined Morrisons in 2015 with
the job of reviving the group after it was damaged by the rise
of discounters Aldi and Lidl in its northern England heartland.
Potts has delivered a steady improvement in trading, helped
by more competitive prices, improved product ranges and
availability and better customer service, resulting in a 22
percent rise in the firm's shares over the last year.
All of Britain's supermarket chains are having to deal with
higher import costs as the pound has fallen about 11.5 percent
against the euro and 19 percent against the U.S. dollar since
June's Brexit vote.
The intensely competitive nature of Britain's food market
means it is hard for grocers to pass on those increased costs to
consumers. However, industry data published on Tuesday showed
food inflation has doubled in a month.
Potts has also shed peripheral businesses and overhauled
Morrisons' online strategy through a renegotiated agreement with
distributor Ocado and a wholesale supply deal with
"Overall the results are solid...but we don't see any
material new positive surprises," said Bernstein analyst Bruno
Morrisons has recently been setting the pace in terms of UK
industry sales. Sales at stores open over a year rose 2.5
percent year-on-year in its fourth quarter, while monthly
industry data has indicated a positive start to 2017-18.
Some analysts believe Morrisons is vulnerable to a stronger
Tesco and a fightback from Asda in 2017.
However, Potts was relaxed. "In the very end a stronger
competitor makes for a stronger Morrisons because we learn from
competitors but obsess about our customers," he told reporters.
Morrisons reported an 11.6 percent rise in underlying pretax
profit to 337 million pounds for the year to Jan. 29, ahead of
analysts' average forecasts, on turnover up 1.2 percent to 16.3
Net debt was cut to 1.19 billion pounds and forecast to fall
below 1 billion pounds by the end of 2017-18. Cost savings
beyond the 1 billion pounds already achieved were also forecast.
($1 = 0.8226 pounds)
(Editing by Keith Weir)