By Scott Wright
SUPERMARKET group WM Morrison has hailed its “robust” profitability during what looks to have been a challenging Christmas for the UK’s grocery giants.
Shares in Morrisons, which was the first of the big grocers to update the market on festive trading, edged up nearly two per cent despite reporting a 1.7 per cent drop in like for like sales in the 22 weeks to January 5. The fall in sales was not as steep as some projected.
Chief executive David Potts declared the Bradford-based chain’s profitability was “robust” amid an “unusually challenging period of sales”.
The challenges facing the wider sector were underlined by retail analyst Kantar, which said yesterday that supermarkets had suffered their slowest growth over Christmas since 2015.
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The analyst found year-on-year sales grew by 0.2% in the 12 weeks to December 29, noting that there was no sign of a post-election spending rush.
Morrisons said its ability to manage costs had helped it overcome the impact of the fall in like for like sales and uncertainty among consumers, and told the City that it expects profits for the year to be within the current range of analysts’ forecasts. The retailer, whose financial year ends in four weeks, is forecast to make a pre-tax profit of between £400m and £431m for its full year, according to a company-compiled consensus of 10 analysts.
Highlighting the competitive market conditions, Morrisons said most prices were the same or lower than last year, with its fuel business “affected by a highly promotional market.” Including fuel, group sales were 2.8% lower on a like for like basis.
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In wholesale, the company turned in a flat performance. While it said it had grown sales with most of its customers, like for like growth was impacted by lower total sales at McColl’s for the period up to November 24.
Morrisons noted that sales at the first 10 conversions from McColl’s to Morrisons Daily convenience stores are strong, revealing that it plans to expand the trial in another 20 stores this month and next as it transitions McColl’s remaining ex-Co-op stores to Morrisons wholesale supply.
Arlene Ewing, investment manager at Brewin Dolphin, said: “Although Morrisons has posted a decline in sales, the drop is not as bad as some had expected.
“The UK grocery market has undoubtedly been tough, with intense competition from the discounters, weak consumer confidence, and high levels of promotional activity. In that environment, these are a resilient set of numbers from Morrisons. There, nevertheless, remain high hopes for its Daily store offering and the initial indicators look promising, with another 20 or so stores to be trialled at the beginning of 2020. All eyes will now be on results from Sainsbury’s and Tesco to see how the other members of the supermarket ‘old guard’ are faring.”
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Mr Potts said: “It was encouraging that during an unusually challenging period for sales, our execution was strong and our profitability robust, demonstrating the broad-based progress we have made during the turnaround.
“This was again down to the hard work of Morrisons exceptional team of food makers and shopkeepers. As always, we will take some learnings into the new year, and look forward to 2020 with a strong plan and solid foundations on which to continue to grow.”
According to Kantar, Morrisons saw sales fall by 2.9% in the 12 weeks to December 29, with Asda down 2.2%, Tesco lower by 1.5% and Sainsbury’s down 0.7%. While Sainsbury’s was found to have held its market share at 16%, Morrisons, Tesco and Asda all lost share.
The biggest festive winner, Kantar found, was Lidl, which grew sales by 10.3%. It was followed by Aldi with sales growth of 5.9%.
Fraser McKevitt, head of retail and consumer insight at Kantar, said: “There was no sign of the post-election rush many had hoped for in the final weeks before Christmas, with shoppers carefully watching their budgets.”
Tesco, Sainsbury’s and Marks & Spencer will also update the City on their festive sales performances this week.
Shares in Wm Morrison closed up 3.05p, or 1.6%, at 195.5p.
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