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Last Updated: Friday, 2 July, 2004, 17:06 GMT 18:06 UK
Morrisons shares slump on warning
Safeway store
I'm sure success is just around the corner
Sir Ken Morrison
Supermarket group Morrisons' shares took a battering on the stock market after warning poor sales at its Safeway business would hit profits.

Morrisons led the market lower, diving 11.21% to close at 200p after earlier dropping as low as 184.29p.

But the Bradford-based group added that the shortfall would be a "short term hit" saying it was confident in the business it bought for 3bn this year.

Same-store sales at Safeway were down 7.2% for the current financial year.

In contrast sales at Morrisons branded stores were up 9.2%.

Slow pick-up

Safeway has been cutting prices to try to win back custom, but sales volumes have been slow to pick up.

"It is likely that reported full year profits for the current year will be substantially lower than current market expectations," Morrisons said.

It is the second supermarket profit warning in two days, following the one from Sainsbury's on Thursday.

Earlier, chairman Sir Ken Morrison and joint managing director Bob Stott admitted to journalists that when they bought Safeway it was not as efficient as they thought it would be.

They added that the company discovered lots of unsold stock such as televisions, mountain bikes and Levi's jeans in the warehouses.

'Cost conscious'

Sir Ken also said the firm had found the culture at Safeway to be different to that at Morrisons.

1. First Safeway bid
2. Second Safeway bid
3. Seals Safeway takeover
4. Poor Safeway sales warning

"We're northern based and we have a unique northern character, we're very cost conscious and we work very hard, " Sir Ken told BBC Radio 4's Today programme.

"I think that when this culture is throughout the Safeway business we'll see a big change in results."

He denied that Morrisons had bitten off more than it could chew by buying Safeway.

"I think it's a great long-term opportunity for us, we've got the team to handle it, and I'm sure success is just around the corner."

Morrisons said that originally it had not intended to change strategy at Safeway for a few months after taking over the business.

Store conversions

However, it said that when it took control, sales were falling fast so it was forced into introducing price cuts to keep Safeway competitive.

Wm Morrison facts
1899 - William Morrison founds egg and butter merchant firm
1958 - Opens first store
1967 - Becomes public company
2004 - Takes over Safeway
Sells 52 stores as part of deal
Current total of 554 stores

Morrisons added that a recent advertising campaign had helped to stabilise sales at the Safeway stores.

It also noted that the first four conversions of Safeway stores to the Morrisons format had been a resounding success, with sales at these outlets up by an average of 36.8% on the same period last year.

The main conversion programme of Safeway stores will start in August, Morrisons said, at the rate of three stores a week.

By the end of November, a total of 53 stores are due to have been rebranded.

Morrisons kicks off stores revamp
23 Apr 04  |  West Yorkshire
Morrisons delivers profits rise
18 Mar 04  |  Business
Morrisons seals Safeway takeover
08 Mar 04  |  Business
Shareholders back bid for Safeway
11 Feb 04  |  Business

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