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Morrisons Christmas Trading: What The Analysts Said

Published on Jan 5 2021 11:29 AM in Retail tagged: Trending Posts / UK / Morrisons / Barclays / Shore Capital / Moody's / GlobalData / What The Analysts Said / AJ Bell

Morrisons Christmas Trading: What The Analysts Said

Morrisons is the first of the UK's 'Big Four' to report Christmas trading figures, with the retailer posting a 9.3% like-for-like sales increase in the 22 weeks to 3 January.

'All customer and brand metrics have improved, market share has grown, and our online and wholesale channels are growing very rapidly as we develop as a multi-channel business,' the company said in a statement. 'We look forward to sustaining this strong momentum into the new year.'

Here's how leading retail analysts viewed its performance.

Russ Mould, AJ Bell

“There is no question that Morrisons and other UK supermarkets are in an enviable position relative to many other businesses and that is borne out by its positive festive update.

“Overall, the company has had a pretty good crisis. Its vertically integrated ‘field to fork’ supply chain helped it to keep the nation fed, plus its early decision to offer discounts to NHS and other key workers and the sanctioning of payments to help keep small suppliers afloat both made it a good corporate citizen but also enhanced its brand and reputation.

“This has been reflected in market share gains. It has also adapted to changing shopping habits by boosting its online capability. This includes a big expansion in its tie-up with Amazon and an overall reduction in its dependency on Ocado.

“While the company has been able to adapt better than most to the pandemic, it still sees brighter days ahead in a post-Covid future as additional costs fade and the fuel market goes back to something like normal.

“Thanks to the course steered by CEO David Potts, the company should emerge from coronavirus in pretty rude health.”

James Anstead, Barclays

"Morrison has released its trading statement for the 22 weeks to 3 January. The retail contribution to LFL was exactly as expected by consensus at 7.2% - and Morrison has more or less repeated its profit guidance from its early December statement. We tend to think the market may be slightly disappointed that the statement is only ‘in-line’ given some high hopes about the sector having had a very strong Christmas.

"As a reminder, when Morrison announced it would forego Business Rates Relief (2 December) it stated that it expected PBT to be in-line with consensus of £433m (before the £230m cost of foregone BRR) – it is now saying £420-440m (despite a further £10m of COVID-related cost since December). It reiterates its previous guidance of £1.7bn year-end net debt."

Thomas Brereton, GlobalData

“Morrisons’ success over the period is largely driven by its expanding online offer, a portfolio that now includes ‘Morrisons on Amazon’, a strong partnership with Deliveroo and innovative propositions such as its food boxes. As a result, Morrisons claims that online sales have more than tripled in recent Q4 trading, a growth figure that will be hard for rivals to match.

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"While analysis must bear in mind that, pre-COVID-19, Morrisons had a smaller online operation than its competitors (and thus easier to achieve higher growth), it has embraced the shift in consumer spend from offline to online as well as any of the major players. This has clearly not come at the expense of store development however, opening three stores during the period (bringing the total to six for the year) and cleverly adapting tired McColl’s stores into fresher Morrisons Daily fascias (31 in total, with conversions likely to continue apace in 2021).

“As the saga of COVID-19 rolls on, alongside dealing with the impact of a rushed Brexit deal, Morrisons must play to its strengths in 2021, particularly emphasising to customers the extent of its local produce sourcing compared to competitors while ensuring that it keeps prices as low as possible to keep pace with a newly value-driven Tesco and the discounters in the face of tough economic conditions.”

Roberto Pozzi, Moody's

“Morrisons’ food sales have kept growing in the 22 weeks to 3 January (+8.1% like-for-like, excluding fuel), driven by continued growth online, with sales more than tripling in the last two months. This confirms our expectation that the UK grocery sector remains resilient despite the recent lockdown measures, and one of the few retail sectors to continue see sales growth.

"We anticipate overall retail sales volumes and profits will continue to recover in 2021 but will remain below 2019 levels for many European retailers; food demand will gradually normalise from 2020 peak levels.

Clive Black, Shore Capital

"Group ex-fuel like-for-like (LFL) sales growth, elevated activity fuelled, of course, by the impact from the pandemic (last 3W LFL sales grew by 9.3%). Whilst so, Covid-19 has had a major cost impact, £280m now estimated for FY2021 (+£10m on prior guidance) whilst business rates (c£230m) will now be paid and the Group has incurred the hit to operating profits from closed cafes and lower food-togo (F2G) activities.

"Hence, we keep our FY2021 forecast (£435m) unchanged albeit await January developments and will review at the month end. As previously guided, FY2021 net debt will be c£1.7bn (pre-leases), a level we expect to notably decline in FY2022, with Morrison reiterating the forthcoming payment of a 4.0p special dividend and a commitment to an ordinary FY2021 final payment.

"We deem this to be a highly credible performance by Morrisons, one where the brand reputation is enhanced, capability heightened, and market share gained. The future is full of uncertainty but Morrisons looks set to press on in FY2022 and thereafter."

© 2021 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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