Today’s first quarter trading update from supermarket chain WM Morrison (MRW) is a mixed bag with good news on the wholesale front but more rotten tomatoes from the retail business.

Excluding sales of fuel, group turnover on a same-store basis for the 13 weeks to 5 May was up 2.3% helped by a 2.1% rise in wholesale revenues with just a 0.2% increase in retail sales. Shares slip 1% to a three-month low of 211p on the news.


The company flags that this is the fourth year running that first quarter retail like-for-likes have been positive, but what it doesn't say is that over the last four quarters sales growth has shrunk from 2.5% to less than a tenth of that figure.

Data from market research firm Kantar had previously shown Morrisons increasing sales by 0.6% for the 12 weeks to 21 April, while rival Sainsbury's (SBRY) saw sales fall by 1.2% over the same period and Asda only managed a 0.3% increase. On Morrisons' own figure it would have fallen behind Asda in terms of sales growth.

And figures released yesterday by the British Retail Consortium (BRC) show overall UK like-for-like retail sales for the three months to the end of April - which coincides closely with the firm’s first quarter - up by 1.2%, with food sales up by 1.7%, again suggesting that Morrisons is under-performing.

The BRC notes there was a slowdown in shop-price inflation last month with twice as many food products being discounted and more than twice as many non-food products.

‘For a while now we have observed a shift in promotional behaviour whereby retailers are trading depth for breadth, with more lines on promotion, but shallower price cuts. The substantial increase in discounting this April is a testimony to shoppers’ reluctance to spend and to the intense competition within the industry’ comments Helen Dickinson, chief executive of the BRC.


There is no official outlook for the current quarter but the comparison looks tough given last year’s ‘barbecue summer’ and the positive driver of the football World Cup.

The best the company can muster looking ahead is that it has ‘many sales and profit growth opportunities’ and that it expects that growth to be ‘meaningful and sustainable’.

One of those growth opportunities is the tie-up with grocery distribution firm Ocado (OCDO) which has done Morrisons a favour today by taking sole use of the new Erith ‘customer fulfilment centre’ until January 2021 as it needs the space following the fire at its Andover facility.

As part of the deal Morrisons will no longer incur its share of the start-up or running costs of the new centre but will have the benefit of a fully-operational facility, which will allow it to ‘ramp up its online offer more quickly and cost effectively’ when it takes up its share again in February 2021.

Also both companies have agreed that Ocado will no longer be Morrisons' sole digital distribution partner, giving the grocer the flexibility to strike more deals.

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Issue Date: 09 May 2019