UK retailer Morrisons has posted its third consecutive year of growth, with revenue up 5.8% to £17.3 billion, and profits rising by 11%.
Praising the group's performance, chairman Andrew Higginson said that the retailer will "continue to prioritise consistent, meaningful and sustainable growth, which I am confident we are well placed to keep delivering."
Here's how a selection of leading retail analysts viewed Morrisons' results.
Russ Mould, AJ Bell
“The combination of rising sales, a healthy jump in pre-tax profits, lower debt, an increased ordinary dividend and even a special dividend of 4p sounds very appealing, but investors are still declining to stock up on shares in Morrison. One reason for this is that operating profit fell year-on-year, while all of the profit uplift came from lower financial charges; owing to the hard work Morrisons has put in to reducing its debt pile.
“Lower debt means less risk, and that is a good thing, but investors may want to see earnings from the grocer’s core day-to-day operations rise before they take a view that the company really is seeing off the threat posed by the discounters Aldi and Lidl, let alone more established rivals such as Tesco, Sainsbury and Asda. After all, Morrison’s operating margin slipped a little, from 2.9% to 2.7%, to suggest the competition remains as brutal as ever."
Danielle Pinnington, Shoppercentric
“Morrisons have been working hard to understand what todays shoppers need from their stores, and putting those learnings into practice. Keeping ear to the ground is so important as shopping habits, household spending pressures and the competitive context change so quickly. Picking up those changes and reacting quickly is hugely important for today’s grocery retailers.”
Martin Lane, money.co.uk
“Morrisons have managed to continue growing in these difficult times when so many other retailers are struggling. Despite Aldi and Lidl nipping at their feet, Morrisons are coming out tops with their current results.
“These strong results may come as a bit of a kick in the teeth for those 1,500 employees in middle management who are currently being made redundant in favour of more customer service staff. The grocer is putting more emphasis on the customer experience to win around consumers and these results would suggest that it’s working. Busy shoppers want the convenience of having their shopping delivered to their door or a quick and pleasant in-store experience without the hefty price tag.”
Sarah Johns, GlobalData
"While Aldi and Lidl continue to take share, Morrisons is at least holding its own with its Big Four rivals, highlighting the success of David Potts’ ‘Fix, Rebuild and Grow’ turnaround strategy, though Morrisons performance in 2014 and 2015 was so bad that growing from such bad comparables in an inflationary environment should be expected. Back then, Morrisons’ performance was so poor that activist investment funds circled, enticed by the idea of spinning off its property portfolio.
"Morrisons under Potts is a much more attractive business, with a more coherent strategy in the two key growth areas in UK supermarket retailing, convenience and online. [...] While inflation has led to cost pressures, Morrisons is better placed than its rivals to deal with this, benefiting from its vertically-integrated supply chain and the high proportion of British-sourced products it stocks, which enabled it to keep the price of a basket of key items at Christmas the same as in 2016."
Catherine Shuttleworth, Savvy
“Continued progress from Morrisons this morning as their turnaround continues. However this turnaround remains totally focused on costs with restructuring continuing across the organisation to create a leaner business. A focus on British makers and producers is strategically important from a price perspective and a popular strategy for shoppers.”
Clive Black, Shore Capital
"Morrisons has announced a special dividend with 4.0p being distributed in addition to the +12.2% 4.43p FY2017 final DPS approved by the Board. We warmly welcome this news as it shows just how far the business under Messrs. Higginson, Potts & Strain has positively travelled; whilst the firm will review its options depending upon conditions at the time, we now forecast a recurring special income stream.
"Elsewhere, the Group came in a little ahead of our CPTP and EPS expectations for FY2018, whilst strong solvency ratios underpin the entry by the Group to the final phase of its capital allocation framework; shareholder distributions. Whilst much has demonstrably been achieved by 'Mozzas' we sense the journey has a good bit further to go, manifested in management's robustly optimistic future comments; growth to be ‘meaningful and sustainable in the future’."
© 2018 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.
