September 14, 2017 / 6:28 AM / 9 months ago

Morrisons turnaround gathers pace with profit rise

LONDON (Reuters) - Morrisons (MRW.L), Britain’s No. 4 supermarket, reported a 12.7 percent rise in first-half profit and a seventh straight quarter of underlying sales growth, cementing a turnaround under chief executive David Potts.

FILE PHOTO: Shoppers walk past a branch of the food retailer Morrisons in west London, Britain, January 7, 2017. REUTERS/Toby Melville/File Photo

The Bradford, northern England, based group, which trails market leader Tesco (TSCO.L), Sainsbury’s (SBRY.L) and Wal-Mart’s (WMT.N) Asda in annual sales, said on Thursday it made an underlying pretax profit of 177 million pounds ($234 million) in the half to July 30.

That compared to analysts’ average forecast of 176 million pounds and 157 million pounds made in the same period last year.

Like-for-like sales, excluding fuel and VAT sales tax, were up 2.6 percent over the second quarter, having increased 3.4 percent in the first quarter.

Morrisons also increased its target for incremental profit from wholesale, services, interest and online in the medium term to 75-125 million pounds, from 50-100 million pounds previously.

A former executive of market leader Tesco, Potts joined Morrisons in 2015 tasked with reviving the group after it was badly hurt by the rise of German discounters Aldi and Lidl in its northern England heartland.

He has delivered a steady improvement in trading, helped by more competitive prices, improved product ranges and availability and better customer service, driving a 27 percent rise in the company’s shares over the last year.

Potts has also overhauled Morrisons’ online strategy through a renegotiated agreement with distributor Ocado (OCDO.L) and struck wholesale supply deals with Amazon (AMZN.O) and McColl’s (MCLSM.L).

Morrisons forecast total annualized wholesale sales to all its partners would exceed 700 million pounds (including tobacco) by the end of 2018.

It expects wholesale supply sales to be more than 1 billion pounds “in due course”.

The group also forecast net debt would remain less than 1 billion pounds for the rest of 2017-18.

“With good trading momentum and a strategy to build a broader, stronger Morrisons, the business is well set to continue to deliver consistent and sustainable growth for its stakeholders,” said Chairman Andrew Higginson.

Reporting by James Davey, Editing by Paul Sandle

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