Morrisons beats expectations for Christmas trading

Morrisons '‹cheered shareholders with a better than expected festive performance which was boosted by strong sales of its premium 'Best' range'‹.

Morrisons' CEO David Potts

The Bradford-based firm reported a 2.8 per cent increase in like-for-like retail sales over the six weeks to January 7 and said it managed to keep prices level with last year despite soaring inflation.

The group’s CEO David Potts said: “Group like-for-like sales were strong. We are entering the third consecutive year of positive growth.

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“Sales were particularly strong over the key Christmas and new year period. Our offer was broader and sales of the ‘Best’ premium range grew by 25 per cent.”

The group said that demand was so strong that it sold out of pigs in blankets and it also saw strong demand for turkey crowns, yule logs and cut price vegetable deals.

Morrisons said it had worked hard to offset rising inflation and the price of a festive basket of goods was the same as last year.

The group said it achieved this by “selling more things that people want to buy” rather than squeezing suppliers or denting margins.

The group is expected to announce a 10 per cent increase in annual profits to £371m.

Morrisons said group like-for-like sales ​(​excluding fuel​)​ jumped 2.8​ per cent​ in the 10 weeks to January 7, with retail sales up 2.1​ per cent​ and wholesale 0.7​ per cent​ ahead. ​Analysts had pencilled in a 1.7​ per cent​ rise in group ​like-for-like ​sales for the 10 weeks.

​Morrisons​ said it enjoyed an “especially strong” festive season as sales picked up pace in the seven weeks​ to January 7. Like-for-like sales rose​ 3.7​ per cent​ across the group after a 2.8​ per cent​ jump in retail and ​a ​0.9​ per cent​ wholesale rise.

“​Inflation has been a feature and our customers became increasingly savvy over Christmas,” said Mr Potts.

​“Customers were on the look out to spend on life’s little luxuries. Our ‘Best’ range hit the spot.”

He praised store colleagues for their hard work over the festive season and said customers had noticed shorter queues and the friendliness of staff.

​Morrisons also reported solid sales of its Nutmeg range of children’s clothing and a good response to its ​new non-food offering.

​Industry data shows that food price inflation rose around 3​ per cent​ ​by​ the end of the year​. Morrisons said this was set to ​fall in 2018 with the prices of some produce, such as seafood, already coming down.

Online sales at grew by more than 10​ per cent​, with the group delivering to more areas of the UK through its partnership with Ocado.​ Morrisons came late to online shopping so it should see further growth in the area as it catches up with rivals.​

Mr Potts​ said that after three years in a row of sales growth, the group ​i​s now “open for business for new stores” and plans to open a “handful” of new supermarkets a year, with around one or two set for 2018.

Morrisons also confirmed its wholesale deal with the McColl’s convenience store chain w​ill​ begin rolling out this week as part of plans to build a “broader, stronger” group.

It started supplying some tobacco to McColl’s earlier than planned, which helped push up wholesale sales in the 10 weeks to January 7.

Mr Potts has led a recovery of the grocery chain by investing in price cuts and calling time on under-performing stores in attempts to turn the page on the supermarket’s ill-fated era under ​previous management.

The McColl’s deal is part of his turnaround efforts and will see the group relaunch the Safeway brand.

The partnership will see the supermarket supply Safeway and branded products to 1,300 convenience shops and 350 newsagents.

Fiona Cincotta, ​s​enior ​m​arket ​a​nalyst at City Index​, said: “Morrison’s recovery story just keeps getting better. It’s ability to maintain healthy sales growth over the crucial Christmas trading period was always going to be a true test and it appears to have passed with flying colours.

​“​Like-for-like sales growth has bounced back after easing slightly in the third quarter. Credit must go to management for keeping prices stable during Christmas despite the weaker pound creating higher input costs.

​“​This positive trading update could well get the company’s share price revival back on track after it stalled somewhat in September.”

Retail analyst Clive Black at Shore Capital said the update proved Morrisons is in “good shape”, while Bruno Monteyne at Bernstein said it was a “good start” to the sector’s festive updates.

Market leader Tesco will report its festive trading update on Thursday.