Morrisons overtakes Asda as cheapest 'big four' supermarket

Morrisons is now the cheapest of the 'big four' supermarkets.Morrisons is now the cheapest of the 'big four' supermarkets.
Morrisons is now the cheapest of the 'big four' supermarkets.
Supermarket giant Morrisons is expected to report an improvement in underlying sales when it reports annual results tomorrow.

The newly-reinstated FTSE 100 firm has been working hard to cut prices and restore its former reputation as being one of the cheapest on the high street.

According to the latest Which? report, Morrisons has overtaken Asda as the cheapest main supermarket following its 1,000 price cuts earlier this year.

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​Which? said Morrisons​ unseated long-standing champion Asda, which has been cheapest every month since ​it​ started tracking in July 2013.

Morrisons is expected to report a 2.1 per cent decline in like-for-like annual sales on Thursday, a marked improvement on the 5.9 per cent fall in 2014.​

However, its financial performance will remain under pressure, with underlying pre-tax profits predicted to fall for the full year to £307m, from £345m in 2014, as fierce competition in the UK grocery sector continues to bite.

The group said it would also be hit by £60m of restructuring costs from store closures and axing around 700 jobs at its head office under chief executive David Potts.

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Shore Capital analyst Clive Black said the grocery sector looks set to “remain intense” in the months ahead, with major stores continuing to cut prices on fresh and chilled foods as German discounters Aldi and Lidl continue to threaten their market share.

It comes after Morrisons surprised the market over Christmas by reporting a 0.2 per cent rise in like-for-like festive sales.

Since then, it has pressed ahead with plans to move the business on to firmer financial ground, announcing a trade tie-up with online retailer Amazon and price cuts on more than 1,000 products.

Morrisons said the supply deal will give Amazon customers access to fresh and frozen products by providing hundreds of items through its food delivery service Amazon Pantry and its subscriber service Amazon Prime Now.

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Mr Black at Shore Capital said: “Morrisons continues to pleasantly surprise us. The group is seeking to self-improve within tight capital controls. It is a long journey but travel has commenced."

Analyst James Collins at Stifel said: “Having stopped the rot and improved standards in stores, the Morrisons management team has moved effectively to expand the geographic reach of its .com business to a more credible level. Another tick in the box of sensible management moves.

“Out of the leftfield, it has also announced a deal to wholesale to Amazon. Of the big four, Morrisons most certainly has the least to lose from giving Amazon a kick-start for its UK grocery ambitions and will additionally benefit from capital-light growth and a wider brand reach.”