UK retailer Morrisons has posted a 2.3% increase in like-for-like sales in the first quarter of its financial year, with retail like-for-likes up 0.2%.
Commenting on its performance, chief executive David Potts said, "We are improving the shopping trip and becoming more competitive for customers, and are pleased with another quarter of positive like-for-like sales."
Here's how leading retail analysts viewed its performance.
Fiona Cincotta at www.cityindex.co.uk
"This disappointing rate of sales growth will stoke fears that Morrisons' impressive recovery could be starting to run out of puff. Most concerning is the rate of retail sales growth, which at 0.2%, is the lowest we've seen recorded by the company since 2016.
"Morrisons is of course a more well-rounded business these days and its growing wholesale division has taken up retail's slack, helping overall like-for-like sales grow 2.3%. That still compares reasonably well to recent sales updates posted by Tesco and Sainsbury's, though the momentum is certainly waning at Morrisons.
"Like other UK retailers, the company is weathering a particularly challenging trading environmental, as the ongoing Brexit circus saps consumer confidence and German discounters keeping pinching market share."
Thomas Brereton, GlobalData
"As a whole, Morrisons will feel that its Q1 results have been another good step towards fixing, rebuilding and growing the company, with topline sales (both on an actual and l-f-l basis) growing above 2% and reaching an impressive 14 consecutive quarters of positive l-f-l growth.
"However, its retail division, contributing a paltry 0.2% to the overall 2.3% l-f-l figure, will no doubt come as a slight disappointment to Morrisons. Furthermore, its upcoming Q2 will be working against a very difficult comparison (with no World Cup to boost alcohol and barbeque foods), and so this quarter is potentially the last in a remarkable run of consecutive quarters of l-f-l growth.
"But possibly the more damning piece of news this morning for Morrisons has come from the other end of the country, with its online associate Ocado announcing its temporary (until February 2021) revocation of Morrisons’ share of capacity at Ocado’s Erith-based fulfilment centre and a “mutual relaxation” of exclusivity provisions. While the reclaiming of fulfilment centre space is an intuitive step for Ocado (following its warehouse fire earlier on in the year reducing its own capacity), it is certainly a blow to Morrisons’ attempts to expand its online presence into the south of England."
Bruno Monteyne, Bernstein Research
"Retail contribution to Q1 LfL of +0.2% was -30bps to Consensus expectations (+0.5%). That is the lowest Retail contribution since Q3 2015 and lower than the weak +0.6% registered in Q4. Along with Kantar data, these are early indications that Morrisons is starting to underperform its peers (i.e. Tesco and Asda). More worryingly, the Online contribution to Retail LfL in Q1 was +0.4%, implying that the contribution from supermarkets was negative.
"Management have called out a competitive and challenging environment. Going into Q2, they will also annualise last year's favourable summer weather and World Cup. It feels management wants to keep down hopes or expectations of a short term rebound in growth momentum."
Darren Shirley, Shore Capital
"Morrisons has delivered sustained LFL progress through a broad-based improvement programme across its Retail estate. We view Retail LFL growth of +0.2% as creditable against a comparative of +1.8% (two-year comparative of +4.8%), ongoing (almost unprecedented) political uncertainty leaving the consumer reluctant to spend outside of seasonal events and a minimal cohort of maturing new space. The Retail LFL performance does suggest slightly negative volumes in the period, with Morrisons continuing to invest to strengthen its proposition for customers.
"The Retail division faces into a comparative hill in Q2 FY2020 reflecting the 2018 World Cup and the early benefits of the favourable summer weather, resulting in a LFL comparative of 2.5%. In fact, the whole Group faces a tougher comparative of 6.3% (9.0% on a two-year basis) which may make the sustenance of positive store-based LFL sales a challenge over the next three months.
"That said, H2 comparatives for the Retail division become more favourable as they ease to 1.3% in Q3 and 0.6% through Q4. These moving parts are factored into our expectations for FY2020, in which we assume +1.0% Retail LFL."
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
