Operating review of the year
2008/09 was another good year for Morrisons – we made sure that we offered our customers great value every day, in a rapidly deteriorating economy, whilst still investing for the long term future of the business.
New retail space
We opened nine new stores in the year, at Giffnock, Gorleston, Whitefield, Kidderminster, Granton, Northallerton, Blandford Forum, Clifton (Nottingham) and Holyhead. Two of these (Giffnock and Kidderminster) were replacements of existing stores and two (Blandford and Northallerton) were former Safeways, which had been closed since the acquisition due to their small size. Our decision to reopen them reflects our growing confidence in the operation of, and return from, smaller stores, and we have been pleased with their performance. A further two of the stores (Gorleston and Clifton) were previous Co-op/Somerfield stores that we acquired and converted to Morrisons. In both cases we saw very significant uplifts in sales compared to those achieved under their former ownerships, and as a result we were pleased, later in the year, to agree the acquisition of a further tranche of stores from the Co-op/Somerfield that we will open in 2009/10.
We continued our programme of store extensions, with 90,000 square feet added in the year, and ended the year with 382 stores and a total of 11.1m square feet of retail space, growth of 2.7% on the start of the year.
Turnover growth
Turnover grew by £1.5bn to £14.5bn, a 12% increase. Part of this increase (c.3%) was due to the very high prices of fuel seen in our forecourts business in the year caused by a worldwide spike in oil prices, and this will unwind again in the coming year as pump prices have come back down. We were pleased with our stores sales growth, which was industry leading and broad based. Like-for-like sales, the measure of growth in existing stores, increased by 7.9% with customer numbers up 4.2% and average basket spend up 3.6%.
Market share growth
Based on TNS market research data, we believe our grocery market share grew from 12.1% to 12.3% in the year.
| Like-for-like stores | Other | 2008/09 Total |
2007/08 Total |
|
|---|---|---|---|---|
| Sales of goods (£m) | 11,877 | 317 | 12,194 | 11,238 |
| Fuel (£m) | 3,523 | 74 | 3,597 | 2,871 |
| Total sales inc VAT (£m) | 15,400 | 391 | 15,791 | 14,109 |
| Turnover exc VAT (£m) | 14,171 | 357 | 14,528 | 12,969 |
| Sales per square foot (£) | 21.65 | 13.46 | 21.41 | 20.18 |
| Customer numbers (m) | 500 | 11 | 511 | 482 |
| Customer spend (£) | 23.92 | 21.14 | 23.86 | 23.10 |
Geographically, we grew in all regions, with the South particularly strong as the Morrisons brand continued to become better known. Across our store estate, we grew in all sizes of stores, with smaller stores below 25,000 square feet leading the way. Our market research shows that we won customers from all major competitors in the year. In-store, our Market Street ranges did well, responding to our strong emphasis on fresh food preparation. Our own-label ranges all showed growth, albeit the strong trends of the previous two years towards premium products slowed, with Eat Smart up 13%, the Best up 5% and Organics up 10%. By contrast, the Value range – relaunched in the year – saw 50% growth.
Industry leading offers
The growth of the Value range reflected the very difficult economic environment experienced by consumers throughout the year. Commodity price inflation, which began in 2007 but fed through strongly into products during 2008, meant that customers were paying more for their weekly shopping basket for the first time in some years. At the same time, disposable incomes were decreasing due to the impact of high energy prices, reduced availability of mortgage credit, a rising tax burden and increasing unemployment. We were quick to respond to the challenges being faced by our customers. Whilst we maintained our focus on the quality, healthiness and provenance of our food, we also delivered a year of innovative value offers to our customers. We launched over 21,000 price cuts throughout the year, and designed our promotions to help customers save money while eating well. Our £4 meal deals proved very popular, and we switched more of our promotions into ‘half price’ rather than ‘buy one, get one free’ in response to customers’ need to spend less each week. We helped customers to treat themselves too, with great value deals such as 2 for 1 offers on party foods, the Mamma Mia DVD for £7 and a range of games for Nintendo Wii at £10. In the run-up to Christmas, we rewarded our most loyal customers with a £20 shopping voucher through the Collector Card scheme.
In addition to value messages, we continued to profile our unique food production capabilities, in our factories and in Market Street, and our understanding of food provenance. Our broad appeal and community involvement was well illustrated by our new schools initiative, ‘Let’s Grow’, which is designed to help schools teach children how to grow food. Over 18,000 schools registered for the scheme, well beyond our expectations, and in February 2009 we began to dispatch free planting and gardening equipment including over 30,000 tools, 29,000 pairs of gardening gloves, 13,000 bags of compost and over 10,000 growing kits.
