Morrisons to unveil annual profits hike despite slowing retail sales growth

Supermarket Morrisons is expected to ring up a hike in annual profits on Wednesday as its wholesale arm helps it weather the impact of a tougher consumer backdrop.

Morrisons is expected to reveal a nine per cent rise in underlying pre-tax profits on Wednesday. Photo: Mikael Buck/Morrisons/PA Wire

The UK’s fourth biggest supermarket is set to reveal a nine per cent rise in underlying pre-tax profits to £407m, up from £374m the previous year.

Its results will be watched closely for the final fourth quarter sales out-turn, after it reported slowing retail sales growth for the first nine weeks covering the all-important Christmas season.

Sign up to our Business newsletter

Sign up to our Business newsletter

Like-for-like retail sales slowed sharply to 0.6 per cent, down from 1.3 per cent in the previous three months.

But like-for-like sales overall rose 3.6 per cent thanks to a three per cent contribution from the wholesale division, which includes tie-ups with McColl’s and Amazon.

Retail experts at Barclays believe comparable sales will continue to rise 3.6 per cent in the fourth quarter as a whole, with retail sales growth edging up to 0.8 per cent and wholesale nudging lower to 2.8 per cent.

They expect the fillip from the wholesale side to continue to ease back, with sales growth from the operation peaking at 4.3 per cent in the third quarter.

The results come as the £12bn mega merger between rivals Sainsbury’s and Asda has been left on the brink of collapse after the competition watchdog said it could block the deal unless they sell off significant stores or even one of the brands.

As well as sending shares in FTSE 100-listed Sainsbury’s tumbling, it also knocked Morrisons as investors fretted over the outlook for consolidation in the grocery sector and the prospect for rivals to snap up offloaded stores.

The Share Centre said: “Recent sales numbers at its core retail business will be important. Competition concerns are not going to go away and management initiatives will take time to execute; there is also fading hopes of the group picking up stores from the...proposed merger.”