Shares in the UK’s fourth-largest supermarket group by market share Wm Morrison (MRW) climbed 0.6% to 182p after it posted a positive Christmas trading update and confirmed its current-year earnings guidance.
Sales over the key Christmas and New Year period were strong with like-for-like revenues up 9.3% excluding fuel. Demand for traditional seasonal favourites such as champagne and smoked salmon helped drive the increase.
ONLINE UPLIFT
Online sales in the fourth quarter, which started in November, have more than tripled so far with growth accelerating at Morrisons.com and on the Amazon platform which offers same-day delivery. Also, home delivery via Deliveroo has been a success adding another sales channel.
The firm says it is ‘still learning and growing’ but that its online operation is already profitable and expects it to become more so as it continues to develop its offering.
The wholesale business is also having a strong quarter as the remaining McColl’s (MCLS) stores not yet covered by Morrison’s are transferred over. During the third and fourth quarters to date it has begun to supply 130 sites, with another 100 or so to be added by the end of March.
Meanwhile, the 30 or so McColl’s which have been re-branded as Morrisons Daily have experienced ‘significant’ like-for-like sales growth and the firm is ‘reviewing the opportunity to convert further stores in the first half of 2021’.
GUIDANCE MAINTAINED
Costs due to the Covid pandemic, including staff absenteeism due to illness and self-isolation, are seen £10 million higher than the firm’s previous estimate of £270 million, but positive operational gearing means pre-tax earnings are still seen in the range of £420 million to £440 million before the repayment of £230 million of business rates.
Reflecting its strong cash generation and solid balance sheet, the firm recently announced it would pay the previously deferred 4p per share special dividend for the second half of last year later this month.
Shore Capital retail guru Clive Black called today’s update ‘a highly creditable performance, one where Morrison's brand reputation is enhanced, capability heightened and market share gained’.
