UK retailer Morrisons reported like-for-like sales growth of 4.1% in its full financial year 2024 with double-digit underlying EBITDA growth of 11.2%.
Moreover, its like-for-like sales rose 4.9% in its fourth quarter, which the UK grocer described as 'the strongest quarter since the start of 2021'.
However, chief executive Rami Baitiéh said its performance was not good enough despite describing the period as "a year of urgent reinvigoration and positive progress for Morrisons".
Self-Improving, Rational
Morrisons is stabilising well and staying rational, analysts at Shore Capital said in a note and added, 'In a competitive market, now embracing Asda's Rollback, Morrisons prioritises investing in its estate, ongoing debt reduction and growth investment.
'CEO, Rami Baitiéh, deserves credit for the better execution, energy and prospects engineered, a rational player in a market where if common sense prevails, further improvement can unfold. We see Morrisons as part of a UK grocery market where prospects are sound.'
Multiple visits to Morrisons revealed that they are in better shape, more regimented, with stronger standards, a bit more theatre, and some improvement in product range as well as a decent emphasis on its More loyalty card, the analysts added.
Shore Capital is of the opinion that Morrisons' overall grocery trade 'did alright' in the festive period despite falling victim to a Blue Yonder supplier challenge, which hampered operations right in the Christmas mix.
'No doubt such headwinds will feature in its Q1 FY25 update. CEO, Mr Baitiéh, has also spoken about the cost challenges ahead, which can be expected to involve cost recovery and so price rises to mitigate [...]. The firm is also cutting its cloth, noting approximately 200 management roles disappearing in the near future,' Shore Capital noted.
Challenges
The analysts highlighted that Morrisons has been working to stabilise and improve its position, mainly due to the financial strain from its acquisition by CD&R, in an intensely competitive market.
They added that given these challenges, Baitiéh deserves recognition for successfully steering the company towards material stabilisation in the 'most challenging' of circumstances.
The competitive environment does not seem to be easing up either with Asda, perhaps its biggest direct supermarket competitor, attempting to similarly stabilise, and self-improve with its new 'Rollback' campaign.
Morrisons is in a better shape to compete with its own Aldi Price Match (APM) campaign and improving loyalty mechanism, alongside what looks like a rebuilding contribution from Myton, according to Shore Capital.
The investment firm summed it up as, 'A more stable Morrisons, a self-improving but rational firm supports our ongoing sanguine view of the prospects for the UK grocery retailing sector.'
