Morrisons warns over consumer uncertainty in 2020

Morrisons' chief executive David Potts
Morrisons' chief executive David Potts
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Morrisons said it has seen little sign of a "Boris Bounce" after the Conservative Party victory at last month's election and warned that consumer uncertainty will remain until the Brexit outcome becomes clearer.

The Bradford-based supermarket chain reported a 1.7 per cent fall in like-for-like sales in the 22 weeks to January 5 in what it described as an "unusually challenging" period for sales.

Chief executive David Potts said: “I think there’s going to be uncertainty in the market until Brexit becomes clearer.

"Until everything is reasonably resolved or becomes clearer, we do expect consumers to remain cautious."

Morrisons said that throughout the Christmas period, trading conditions remained challenging and the customer uncertainty of the last year was sustained.

The firm slashed prices to boost trade, but admitted it missed out after choosing not to take part in November's Black Friday offers.

Morrisons said full-year profits remain on track with forecasts despite the Christmas sales disappointment. Morrisons has another four weeks to go before the end of its financial year.

In the overall 22-week period, third quarter like-for-like sales to November 3 fell 1.1 per cent. This followed a 2.4 per cent drop in the previous three months.

The group saw flat comparable sales growth in its wholesale division over the 22 weeks, which includes tie-ups with McColl's and Amazon.

Morrisons said wholesale trading was hit by lower total sales at McColl's, but added that the performance was better at the 10 stores converted to Morrisons Daily.

It plans to roll this trial out to around another 20 stores over the next two months.

Thomas Brereton, retail analyst at GlobalData, said: ‘‘Morrisons, the first of the big four supermarkets to report Christmas trading, announced a disappointing set of results.

"Morrisons will find some solace in the fact it was facing a laudable comparative period after a strong performance last year, a grocery market with near-zero inflation, and facing the same politically-related adversity faced by all retailers at the end of 2019.

"In conclusion, Morrisons does not need to overhaul its strategy, management or product ranges. Its focus on expanding its online presence (through Amazon as well as in-house operations) remains the correct strategy, and – coupled with growing wholesale partnerships and savvy store estate management – stands Morrisons is good stead for 2020."

Analyst Sophie Lund-Yates at Hargreaves Lansdown said: “Consumer uncertainty is a cloud that still lingers over Morrisons. Customers have more choice than ever about where to do the weekly shop, and the fact purse strings have been pulled tight for a while means it’s a perfect storm for sales.

"The lower price tags at Morrison also mean it’s in more direct competition with Aldi and Lidl too."

She said details on Morrisons' performance over Christmas were thin on the ground, but the numbers suggest the key festive period could have been weak.

She added: "Looking ahead, Morrisons has a potentially lucrative growth lever at its disposal. While its current online offering is pretty paltry compared to rivals, it strengthened ties with Amazon last year. Helping the online giant upscale its own delivery service is a good place to be in our view.”

Morrisons' figures kicked off the festive trading updates from the major UK players and follow sales data from German discounter Aldi on Monday, which revealed a 7.9 per cent rise in total sales for the four weeks to December 24. Aldi did not provide like-for-like figures.