Earlier today, Morrisons posted a 3.6% increase in like-for-like sales during the nine weeks of to the start of January, its fourth consecutive Christmas of like-for-like sales growth.
“Our performance shows colleagues are listening hard and responding to customers, providing consistently great value and good quality when it matters most,” commented chief executive David Potts.
Here’s how leading retail analysts saw its performance.
Russ Mould, AJ Bell
“Despite this representing a fourth consecutive Christmas of like-for-like sales growth, the market appears unconvinced. This is perhaps down to the supermarket’s retail business only providing a small proportion of the growth in the period and because overall, and despite a good contribution from the wholesale arm, sales were modestly behind expectations.
“Retail sales growth was down materially both quarter-on-quarter and year-on-year although Morrisons did hold its prices for ‘key Christmas items’, a sign that management are not prepared to make short-term decisions to flatter quarterly performance.
“Since joining in 2015, chief executive David Potts has done a good job of turning around Morrisons’ fortunes but there still looks plenty to do to keep the business on course.”
Clive Black, Shore Capital
“From secondary data and industry soundings we sense that Morrisons, along with the rest of the trade, entered the December month after a tough and quite distinctive October/November. The business, we sense, traded conditions robustly, focusing upon core disciplines – availability, core price and service - to deliver a fourth consecutive positive Christmas update.
“Stripping out the dot com activity from the Morrisons retail figures leads us to assume marginally positive underlying LFL sales growth in store. Against tough comparatives and the aforementioned distinctive and tough run-up to December, which few other listed grocers have chronicled to date, we believe that Morrisons’ performance is, however, commendable.
“We sense that supermarket volumes are slightly lower yoy, with overall inflation in the system, noting though that Morrisons states that the price of its basket for c100 key Christmas lines was unchanged year-on-year (yoy).”
Thomas Brereton, GlobalData
"Morrisons has been unusually quiet in its update, with a notable lack of commentary on the performance of its Best range (of which it launched 250 products exclusively for Christmas) and its online sales (having started southern UK online fulfilment from Ocado’s Erith distribution centre in Q3). And while this doesn’t suggest a poor performance in those areas, the update points towards price cutting as the main source of increasing customers, as Morrisons worked hard to keep the basket price of 'key Christmas items' the same as 2017.
"Morrisons faces an interesting 2019. It is tipped to be the least vulnerable of the Big Four in the event of a challenging Brexit, given its vertically integrated supply model (about 25% of own-label product in produced internally) and growing wholesaler opportunities providing security through diversification. But with pressure mounting from both the discounters and its Big Four rivals, it will need to ensure both organic in-store success and development of its immature online business in order to vie effectively for market share. ''
Bruno Monteyne, Bernstein Research
“LFL number of transactions of -0.9% was roughly offset by LFL items per basket of +0.8%. this is a change from previous periods, when transactions were positive and items per basket down. The mix effect in LfL seems also smaller than it has been.
“Almost all the wholesale growth is due to the McColl business being transferred. Estimating exactly when and how fast that business is being transferred to Morrisons is not straightforward. For us the key point remains: Morrisons drives strong sales growth from its asset base through wholesale, without having to spend material capex. It's a great business to grow.”
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
