Morrisons has posted a 1.7% decease in group like-for-like sales in the 22 weeks to 5 January, a period that includes both its third quarter and the nine-week Christmas trading period.
Commenting on its performance, chief executive David Potts said that while sales performance for the business was "challenging", Morrisons' "execution was strong and our profitability robust, demonstrating the broad-based progress we have made during the turnaround".
Here's how leading retail analysts viewed the retailer's performance:
Nigel Frith, www.asktraders.com
"Investors hoping for a Christmas bounce for Morrisons over the Christmas period will be disappointed. Group sales at WM Morrisons were down 1.7% in 22 weeks to 5 January. After Aldi reported weaker growth than usual over the Christmas period on Monday, hopes were running pretty low for Morrisons, the first of the Big Four supermarkets to report on the crucial Christmas period.
"This December was always going to be a more challenging time given the politically uncertain landscape running up to the elections on 12th December. However, hopes that customers would flock to the store after a decisive win from the Conservatives didn’t materialise.
"Despite items in Morrisons own Christmas Basket being cheaper than last year, any sense of improved optimism following the clearer political picture has failed to show itself in the numbers yet. The bottom line is consumer confidence is still low; until there is a complete resolution to Brexit consumers will keep spending cautiously."
Thomas Brereton, GlobalData
"Morrisons will find some solace in the fact it was facing a laudable comparative period after a strong performance last year, a grocery market with near-zero inflation, and facing the same politically-related adversity faced by all retailers at the end of 2019. However, retail l-f-l sales fell worryingly far over the 22-week period, and with a Q3 fall of -1.1%, suggests an unsettling fall of c-2.6% over the core 9-week Christmas period.
"Thus, even with the aforementioned explanations for a trying trading period, Morrisons may be left scratching its head as to why it now appears a grocery laggard after spending much of 2018 and the first half of 2019 as a leader.
"But in conclusion, Morrisons does not need to overhaul its strategy, management or product ranges. Its focus on expanding its online presence (through Amazon as well as in-house operations) remains the correct strategy, and – coupled with growing wholesale partnerships and savvy store estate management – stands Morrisons is good stead for 2020. Instead, as rightfully stated by CEO Dave Potts, Morrisons should see this disheartening period as an opportunity to 'take some learnings into the New Year' and move with momentum into 2020.''
Russ Mould, AJ Bell
“The slogan might need to be updated from ‘Morrisons makes it’ to ‘Morrisons makes it by the skin of its teeth’ after today’s trading missive from the supermarket and wholesale food group.
“Despite falling festive sales the company is spared a negative market reaction as worse was pencilled in. The shares had already fallen as investors became nervous ahead of the announcement. Chief executive David Potts promises a ‘strong plan’ for the coming financial year.
“Drawing like-for-like comparison with last year’s showing is made more difficult as this update covers a 22-week period and its counterpart 12 months ago covered just five weeks, which seems an unnecessary complication.
“It does not seem too cynical to assume it is designed to draw a veil over deterioration in trading conditions in recent weeks. Tight control of costs at least means profit expectations for the full year are unchanged.
“The release is a reminder of pressures on the groceries sector which faces a combination of cut throat competition, a challenging consumer backdrop and the increasing shift to ordering the weekly shop online."
Clive Black, Shore Capital
"Morrison records ‘challenging trading conditions and continued uncertainty amongst consumers’ in its statement to the market. In this respect, we repeat our observation of a UK grocery market that ran 1-2% below our expectations of the summer and one that became much more promotional embracing extensive discount events, wine and fuel vouchers.
"Morrison, in this respect, was quite cautious and we expect trading tactics to form part of the learnings management is currently reflecting upon.
"Additionally, and perhaps more optimistically, we shall keep an eye on forthcoming UK Government policy formation around household incomes and whether or not consumer confidence improves as a potential source of rising industry activity at a tidal level in CY2020."
Richard Lim, Retail Economics
“Festive cheer was not shared with the retailer as shrinking sales demonstrate the fiercely competitive food sector.
“These figures suggest Morrisons was outmanoeuvred by its competitors. Shoppers remained fixated on searching for the best value and highly price-sensitive against the backdrop of ongoing uncertainty.
“Despite the pressure on margins, the industry remained stuck in a spiral of continual discounting with the depth and breadth of promotions snowballing in the run-up to Christmas. Nevertheless, a firm grip on costs offset some of the decline in sales to deliver profitability in line with previous expectations.”
Bruno Monteyne, Bernstein
"Morrisons' -1.1% in Q3 and -1.7% in H2 to date was a +50bps and +30bps beat to consensus respectively. The positive message from this would be that Kantar underreported Morrisons growth by about 50 bps; if that is reflected across the other retailers, that should be positive news for the UK food retailers and suggests more beats may be under way (SBRY on Wednesday, TSCO on Thursday). Management called out the tough trading conditions and continued consumer uncertainty."
© 2020 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
