Comment: Morrisons must reassure City

After the summer lull, the flow of trading statements begins again and the runes will be read ahead of the fast-approaching golden quarter.

Next week, food specialist Morrisons will serve up its interims. Investor confidence in Morrisons has been shaken in recent months as the retailer, once leader of the supermarket pack, has showed signs of lagging competitors. Analysts have been taking their red pencils to the grocer’s forecasts for a while now, and there are fears that further downgrades may follow the half-year figures.

Harder times for Morrisons have resulted from continued ferocious competition among the big grocers, including tactics such as money-off vouchers. At the moment, rivals Asda and Sainsbury’s seem at the top of their game while Tesco is in the midst of a revival drive that is showing early indications of bearing fruit.

Morrisons, under the leadership of Dalton Philips, has not been standing still. The acquisition of Kiddicare both bolstered its non-food offer and brought it a strong online brand. But food remains the motor of the business. Philips has been overhauling his shops to emphasise product provenance and freshness but that programme, welcomed by investors at first, is now prompting questions.

Shore Capital, for instance, wonders whether the Fresh format may be “falling between two stools, disenfranchising core customers with a higher category fresh food offer that has, as yet, failed to entice more affluent ones”.

The City will look for reassurance that Morrisons can continue to hold its own, because there are ominous signs that conditions will get tougher. In particular, bad weather here and abroad – downpours in Britain and drought in the US bread-basket states – means the spectre of food price inflation hangs over the feast.

If putting dinner on the family table becomes more expensive then consumers are likely to seek savings and Morrisons, along with the other big four grocers, will also have to confront an Aldi and Lidl that are becoming ever more part of the mainstream food retail scene.