Morrisons reports strong first quarter trading

?Morrisons ?has reported a robust performance in 2019 despite? political and economic uncertainty ?damaging consumer confidence.
Morrisons warned that it facesa tough comparative over the next three monthsMorrisons warned that it facesa tough comparative over the next three months
Morrisons warned that it facesa tough comparative over the next three months

?The Bradford-based firm warned that it faces a tough comparative over the next three months.

Morrisons' chief executive David Potts said:? "Despite continued political and economic uncertainty which is still impacting consumer confidence, we delivered another robust quarter of like-for-like sales growth - our fourth year of positive first quarter sales.

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"Trade over Easter was particularly strong and customer satisfaction was up as we again improved the shopping trip for customers at this key time for family and friends to get together."

Mr Potts said he expects the market to remain competitive and challenging. He also warned that the second quarter could be hit by comparisons with last year when the group benefited from favourable, hot summer weather and the football World Cup.

"However, we remain confident that Morrisons still has many sales and profit growth opportunities ahead, and continue to expect that growth to be both meaningful and sustainable," he added.

Morrisons' like-for-like sales rose 2.3 per cent in the 13 weeks to May 5. This was slightly below analysts’ average forecast for growth of 2.5 per cent, and below growth of 3.8 per cent in the previous quarter. In the first quarter, like-for-like retail sales rose 0.2 per cent, while wholesale rose 2.1 per cent.

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Mr Potts said the first quarter was split between soft sales in January and February and then a pick up over Easter

"Consumer confidence remains weak," he told the Yorkshire Post.

"We can't be immune from that level of confidence, but it felt the first part of the quarter - in January and February - very much felt like October/November when trade was quite tough. Consumers remained very savvy.

"We had wall to wall coverage of Brexit in January and February, with a breather at Easter.

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"I would have to call the quarter as a tale of two halves. The country went through moments of uncertainty - asking are we in or out (of Europe)

"Easter staged a recovery as far as consumers were concerned because they came out and spent up, a bit like they did at Christmas after we had a slower autumn. In January and February, I think people were a bit overwhelmed by the ongoing Brexit discussions.

"So we look ahead to the second quarter and see how consumers are feeling and what we can do to trade through.?"

?Morrisons also announced that the supermarket's online business will temporarily suspend its capacity at a London Ocado warehouse. This follows the fire at Ocado's Andover facility, which has left the online grocer looking for more capacity. It is expected that Morrisons will be reintroduced to the facility in 2021.

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Mr Potts said: "We are improving the shopping trip and becoming more competitive for customers, and are pleased with another quarter of positive like-for-like sales."We will continue this important work, including on those favourite items we know our customers want to buy at Morrisons."

Analyst Clive Black at Shore Capital said: "Morrisons' first quarter trading statement reveals the sustained and balanced progress made by the group since 2015.

"We retain our 2020 Morrison forecasts, just one quarter into the year, noting the group faces particularly challenging second quarter comparatives which ease moving into the second half of 2020.

"Morrison is in ever-improving shape, in our view, supported by a very strong financial backbone.

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"We forecast further good growth in earnings, sustained cash generation and a healthy income yield of 6.2 per cent which make for an attractive investment proposition in UK retail."

Senior market analyst Fiona Cincotta at City Index said: "This disappointing rate of sales growth will stoke fears that Morrisons' impressive recovery could be starting to run out of puff."Most concerning is the rate of retail sales growth, which at 0.2 per cent, is the lowest we've seen recorded by the company since 2016. Morrisons is of course a more well-rounded business these days and its growing wholesale division has taken up retail's slack, helping overall like-for-like sales grow 2.3 per cent."M?s? Cincotta said Morrisons compares reasonably well with recent sales updates posted by Tesco and Sainsbury's, although she said the momentum is "certainly waning at Morrisons".

"Like other UK retailers, the company is weathering a particularly challenging trading environmental, as the ongoing Brexit circus saps consumer confidence and German discounters keeping pinching market share," she added.?