Supermarkets operator Morrisons (MRW) reports bumper sales over the Christmas and New Year period. Like-for-like sales increased 3.7% for the six weeks to 7 January, a performance all the more impressive given tough prior year comparatives.
CEO David Potts’ (pictured below) strategy is clearly paying off. More shoppers are flocking to the tills and analysts are increasingly excited by the potential of the group's wholesale activities.
Shares in the Bradford-based grocer are bid up 3.1% to 233.9p on news of better-than-expected trading in the so-called ‘golden quarter’, so-named because it includes the important Christmas period.
Like-for-like sales, excluding fuel, rose 2.8% in the 10 weeks to 7 January, underpinned by solid retail basics.
BOOST FROM THE BASICS
Highlighting the success of Morrisons’ Best premium and Free From and Morrisons Makes It ranges, Potts enthuses: ‘More and more customers found more things they wanted to buy at competitive prices at Morrisons this Christmas’ and ‘our plans to become a broader and stronger business are progressing well.’
‘Customer satisfaction again improved year-on-year − we had more tills open, shorter queues, and customers noticed our colleagues' friendliness even at the busiest times.
We also continued to become more competitive and, despite input cost pressures on many commodities, the price of a basket of key Christmas items was the same as last year. Like-for-like volume was positive.'
Morrisons' upbeat festive update accompanies the latest grocery market share figures from Kantar Worldpanel, covering the 12 weeks to New Year’s Eve.
The figures show the average UK household shrugged off economic worries to spend a record £1,054 on groceries in the Christmas quarter, during which grocery inflation ran at 3.7%. You can view the latest sales share figures for all the major grocers here.
Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, comments: ‘Overall supermarket sales increased in value by 3.8%, with an additional £1bn ringing through the tills compared to the same festive period last year. Shoppers parted with £747m on 22 December alone, making the Friday before Christmas the busiest shopping day ever recorded.’
Citing online growth of over 10% via Morrisons.com, Morrisons also excites with the comment ‘wholesale growth continues to accelerate’.
Morrisons, which already has a wholesale tie-up with Amazon as part of the US tech titan’s incursion into UK online grocery delivery, says its deal to begin supplying all 1,650 McColl’s Retail (MCLS) stores with Safeway products and national brands alike begins this month.
‘There is more growth being contributed by wholesale where, as previously noted, there is a good capital-light growth lever for Morrisons that the market may have overlooked,’ comments ETX Capital’s Senior Market Analyst Neil Wilson.
‘Wholesale contributed 0.9% to group growth in the six weeks over Christmas (0.7% in the ten-week period). With the failure of Palmer & Harvey (P&H), the wholesale business heads into the New Year in fine shape and with good options.’
Over at Shore Capital, seasoned retail watcher Clive Black writes: ‘Morrisons is in good shape, the balance sheet is strong, which may lead to an evolution of the Group’s Capital Allocation Strategy in calendar year 2018, with further self-improvement, broadening (e.g. McColl’s) and growth (e.g. new stores) to come through.'