UK retailer Morrisons has posted a promising first quarter, with like-for-like sales up 3.4%; the first steps towards building a "broader, stronger Morrisons," says chief executive David Potts. Here's how the analysts weighed up the grocer's performance.
Tom Berry, GlobalData:
"A sixth consecutive increase in l-f-l growth for Morrisons as the turnaround continues under CEO David Potts’ ‘Fix, Rebuild and Grow’ strategy, as Valentine’s Day, Mother’s Day and Easter helped drive sales of almost £4bn in Q1. While l-f-l growth of over 3% is the highest for any of the recent positive quarters, these figures are buoyed by significant inflation seen throughout the industry in 2017.
"The market trend for rising transactions and falling basket sizes is showing no signs of slowing at Morrisons as items per basket fell a staggering 6.9% in the quarter. This proves that convenience continues to be key in the industry as consumers look to undertake more regular, smaller shopping journeys."
Himanshu Pal, Kantar Retail
"The revamped Morrison’s offer around simplified assortment, aggressive pricing, and targeted private label investments – such as ‘The Best’ premium range - continues to receive strong shopper traction.
"While Morrisons’ performance is noteworthy it still operates in an extremely difficult trading environment. While inflationary conditions in recent months haven’t really dampened consumer spending and in fact has helped top line supermarket sales, rising prices and its eventual impact on consumer spending does pose a challenge for the sector. Alongside the still growing discounters, Morrisons will also have to contend with not only a resurgent Tesco but also Asda who will be looking to reclaim lost ground, especially in the Midlands and north of England."
Clive Black, Shore Capital
"Morrisons has delivered a sixth consecutive quarter of like-for-like (LFL) sales growth delivering 3.0% in-store, so ex-fuel, ex-VAT and ex-other. In addition, new avenues for growth in wholesale are starting to feed into the top-line at 0.4%. Relatively early doors into FY2018 we are encouraged by this very strong performance against a stiffer comparative, so allowing us a little more confidence still to stand by our forecast of 8.3% EPS growth year-on-year."
David Beadle, Moody's:
“Morrisons’ ongoing positive like-for-like sales momentum and their commitment to continued debt reduction underpin our rationale for changing the outlook on the company’s Baa3 rating to positive in March this year.”
Danielle Pinnington, Shoppercentric:
“With households starting to be a bit more cautious about their spending, Morrisons seem to be benefitting from the work done to return to their value roots. Their results are in marked contrast to Sainsbury’s. Learning from the recent past it is the mults in the middle ground of UK grocery retailing who will need to be most flexible if Brexit inflation causes problems for shoppers.”
Barclays European Food Retail Equity Research:
‘There may be some focus on the fact that LFL items per basket fell -6.9% - an accelerating rate compared with -5.3% in 4Q. The company states that LFL volume was positive in 1Q again, suggesting that the LFL items per basket metric is being impacted by mix effects.’
Bruno Monteyne, Bernstein Research:
"Strong LfL and volume growth suggests Morrisons' strategy is working. After fixing the retail essentials (queueing, availability, merchandising), they are now driving growth from expanding into more premium private label, clothing, general merchandising, 50 bps from online and excitingly 40bps from wholesale."
© 2017 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
