Morrisons catches a winter chill

The Bradford-based group said consumer confidence is very low and people held off from buying festive treats until the week before Christmas.

Morrisons said shoppers were keen to celebrate a traditional Christmas with strong demand for classic foods such as turkey, sprouts and stuffing.

But they downgraded, with champagne sales down seven per cent while sparkling wine sales rose 156 per cent. Pork sales rose by seven per cent as customers supplemented plates with cheaper meats.

Chief executive Dalton Philips said promotions accounted for more than 40 per cent of sales over Christmas as people scrambled to find bargains.

“It’s the highest level of promotion we have all year. Consumers are looking for value of the shelf. It’s very aggressive out there,” he said.

Morrisons said like-for-like sales rose by 0.7 per cent in the six weeks to January 1, a slowdown since the 2.4 per cent sales growth for the 13 weeks to the end of October. Analysts had expected growth of 1.3 per cent. Unlike previous years, shoppers did not buy festive treats such as mince pies and chocolates until the week before Christmas Day.

“People had ‘Quality Street’ on the table at Christmas, but they weren’t buying them in November,” said Mr Philips. “Sales in the last seven days before Christmas were 25 per cent up on two years ago. People were holding off until the last minute.”

Shore Capital analyst Clive Black said Morrisons’ performance was “disappointing”.

“We note that Asda appears to have had an especially strong festive period and given the reasonably high level of overlap with Morrisons it leads us to suggest that it has competitively impacted its Yorkshire based rival,” he added.

Mr Philips declined to comment on the suggestion, saying that the market is still awaiting Asda’s festive figures.

“We had 800,000 more customers over Christmas and we’ve been trading well all year. You don’t want to chase sales,” he added.

Leeds-based Asda said it was pleased with its Christmas performance but will not give out any details until a market update on February 21.

Analysts had expected Morrisons to produce the strongest sales of the three grocers reporting Christmas figures this week. Tesco posts Christmas sales on Thursday, while Sainsbury’s reports tomorrow.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “Morrisons seems to have fallen foul of the wider economic environment, whilst the update does not bode well for Sainsbury’s and Tesco.”

Sainsbury’s is expected to report like-for-like sales of 0.4 per cent over the festive period, while Tesco’s like-for-like sales are expected to fall by up to two per cent.

Analyst Sam Hart at Charles Stanley described Morrisons’ performance as “solid”.

“We think Morrisons can continue to make steady progress. Longer term, opportunities exist for entry into the convenience store and online,” he said.

Morrisons said it is comfortable with annual profit forecasts of £920m-£925m.

Morrisons declined to comment on a report that it is in talks to acquire electronics chain Best Buy’s UK stores for its Kiddicare range, but said if there is an opportunity to accelerate growth of the Kiddicare business, it would take it.

n Food and drink chain Booths, which has three stores in Yorkshire, reported a 3.1 per cent increase in festive sales in a further sign that the upmarket end of the sector held up well.

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