Troubled supermarket group Morrisons has laid bare the full scale of its trading woes after warning that annual profits could be as low as £50 million.
Analysts said the announcement raised serious questions over Morrison's ability to assimilate the Safeway chain it acquired in 2003.
In what it called a " clarification statement", which analysts said did little to clarify Morrison's troubles and even less to reassure the market, the company said pretax profits would now fall in a range of £50 million to £150 million, well below the equivalent £320 million figure posted last year.
Morrisons had said last month that it was unable to give any guidance on profits, leading some analysts to predict they may be as high as £275 million.
The group chaired by Sir Ken Morrison has issued a series of profits warnings after experiencing trouble integrating the £3 billion purchase of Safeway.
It said yesterday that it was working with its accountants to provide clearer figures and would comment further in a trading update at the end of July.
In a statement to the stock exchange, it said there was still "every indication" that its financial performance would improve "significantly" after conversion of Safeway stores to the Morrisons format was complete.
The Bradford-based group said in a profits warning last month that costs associated with running both Morrisons and Safeway were likely to remain higher and were taking longer to eliminate than hoped.
Morrisons had never warned on profits before the acquisition.
At its annual meeting two weeks ago, Sir Ken announced he was stepping down from the day-to-day running of the firm to concentrate on its longer term strategy.
He pledged to stay with the group for at least another year to see through the integration of Safeway.
The company said at the time that recent sales had been encouraging, with likefor-like sales across the group
5.4 per cent higher in the first 15 weeks of the year against a
4.1 per cent rise in the first six weeks.
However, sales at the original Morrisons stores were lower as they lost trade to converted Safeway outlets.
Analyst Sanjay Vidyarthi, at brokers Teather & Greenwood, said: "In terms of clarification, it doesn't really give clarification in that it's not at all clear where this additional cost, or whatever it is, is coming from."
Richard Hunter at brokers Hargreaves Lansdown was no more inclined to optimism.
"It's just one thing after another with Morrisons. It's three profit warnings in the last six months. A big hole just ahead of their results and the City really questions whether they've got their arms around the Safeway acquisition at all." Morrison has spared no effort to complete the Safeway integration swiftly, but its two-a-week store-conversion rate has been a real strain for a mid- sized retailer in Europe's most competitive retail market.
Questions have also been raised regarding how successfully Morrison's valueoriented image washes with the more affluent customer base of Safeway's southern English heartland. But while a company spokeswoman said she could not guarantee that yesterday's bad news would be the last, Morrison did promise brighter prospects ahead.