Morrisons, the UK supermarket group which sparked off the bidding war for compatriot Safeway earlier this year, has announced full year results for 2002 which go some way towards strengthening its case to acquire the larger chain.
The company reported a substantial increase in both turnover and profits for 2002, and the 36th successive rise since the company went public in 1967.
Like-for-like sales were up 5.3 per cent for the year, but the addition of six new stores lifted total sales by 9.5 per cent to £4.6 billion (€6.7bn). Chairman Sir Ken Morrison said that the increase had come from a combination of low prices, special offers and multi-save promotions - a formula which he believes would invigorate sales at Safeway as well. Total group turnover (after VAT and including other sales) increased by 9.4 per cent to £4.3 billion.
Operating profit of £262 million was 14.2 per cent higher than last year, while pre-tax profit rose to £277 million, an increase of 13.8 per cent. Morrison said that the company had also managed to improve its gross margin by 1 per cent during the year despite prices which were "amongst the most competitive in the industry".
While Morrisons - like all the other bidders - is still awaiting a decision of the Office of Fair Trading regarding Safeway (though it is widely believed that the company's bid for the chain will not be referred to the Competition Commission). The company is not sitting on its laurels. Its programme of store expansion continued last year, and nine more will open in 2003 taking the company's total to 125. Regardless of what happens with Safeway, a further 10 new stores are programmed for 2004, including the company's first in Scotland (where, incidentally, Safeway has a large number of outlets).
Meanwhile, a report in the Financial Times suggests that Wal-Mart, the US retail group which owns Asda in the UK, has approached a number of Safeway shareholders in a bid to take a stake in the company in order to steal a march on its rivals.
If Wal-Mart can acquire just under 30 per cent of Safeway's shares, it can block any rival bid, the paper said, although there is no indication as yet that any of the retailer's major shareholders have agreed to sell their shares to the US group.