Morrisons First-Quarter Results – What The Analysts Said

By Steve Wynne-Jones
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Morrisons First-Quarter Results – What The Analysts Said

Supermarket chain Morrisons has posted a 2.7% increase in like-for-like sales in the first quarter of its financial year, a performance it has described as 'robust' given the tough comparatives with the corresponding period last year.

"We've had an encouraging start to the year, with positive like-for-like sales and some good momentum across Morrisons both on a one and two-year view," commented David Potts, Morrisons chief executive.

Here's how leading industry analysts viewed its performance:

Russ Mould, AJ Bell

“Supermarkets are now lapping very tough comparative figures. The nation rushed to stockpile food and drink during the latter part of first quarter 2020 and retailers are now reporting the same equivalent period for 2021. Under these circumstances, Morrisons’ 2.7% like-for-like sales growth excluding fuel isn’t too bad.

“Importantly, wholesale accounted a good chunk of that growth, with Morrisons continuing to strengthen its position as a key supplier to the likes of Amazon and McColl’s.


Morrisons is now at the point where it needs to think about the next stage of its career, and we’ll find out its refreshed spending plans in September. This will almost certainly involve boosting capacity to fulfil online orders and seeing how it can further expand as a supply partner.

“Competition continues to be fierce in the industry and the latest push by many food sellers is for same-day, rapid speed deliveries. The economics of such a proposition are still being ironed out.

“To win in the supermarket industry, companies need to excel on multiple fronts, namely value for money, service and adapting to customer needs. Customers can be very demanding and supermarket bosses cannot afford to upset anyone as there is always another food and drink seller around the corner waiting to sell their goods.

“Morrisons doesn’t seem to be putting a foot wrong in terms of these factors, but equally there is nothing that really makes it stand out from the crowd. In the long term that could be to its detriment.”


James Andrews,

"Morrisons has reported a sales increase of 5.3% despite the high cost of adapting premises and processes as well as limiting customers in store them to keep people safe during the pandemic. Teaming up with Amazon and DPD to scale up its online grocery delivery service has proven lucrative, and given the supermarket huge potential for growth.

"Morrisons tripled its number of weekly home deliveries during the past year, which has drastically helped the store’s profitability. Initially, Morrison's online offering and eCommerce department was significantly smaller than its rivals but pairing up with Amazon and delivery firm DPD has put the supermarket on the map and in a much stronger position.

"The partnership with Amazon, expanded heavily over the past 12 months, also let it offer same day delivery while the Deliveroo tie-in offered to get food to people's doors in 30 minutes using the firms' existing delivery networks. It's a prime example of how Morrisons has innovated throughout the pandemic in an effort to serve customers better - an effort that has been rewarded as it held market share better than many rivals under pressure from the likes of Aldi and Lidl.

"But as the economy opens up, things could start to change as customers return to offices and revert to older shopping patterns more reliant on picking a few things up on the way home from smaller Local and Express stores and less on a big weekly shop or online delivery."


Clive Black, Shore Capital

"Morrisons has announced a robust start to FY2022 with Group LFL sales (ex-fuel/ex-VAT) up by 2.7%, ahead of our 0.8% expectation. The period comprised 1.6% Retail LFL sales growth, with volume ahead of this level, and a 1.1% Wholesale contribution, the latter boosted by the addition of c230 McColl’s store transferring over plus the conversion of elements of McColl’s estate to the ‘Morrison Daily’ banner (wholesale revenues rose by 21% in the period).

"The comparable period was one of considerable turmoil for the British grocery industry as the pandemic took hold. Accordingly, for Morrisons, with an end of January year-end, Q1 FY2022 commenced with a quite normal trading comparison in February, one where the group’s core retail division was seeing a gradual improvement in prior trading momentum, followed by a somewhat chaotic March, remember the stripping of supermarket shelves as the pandemic took hold, and then lockdown 1.0 conditions when the Food & Beverage channel was closed down (including Morrisons’ cafes) and folks were restricted to home, so boosting the online channel.

"Accordingly, we see the announcement of 2.7% ex-fuel, ex-VAT like-for-like (LFL) sales as a good and encouraging outcome for Q1 FY2022 given the comparative headwinds; on a two-year basis, group LFL sales rose by a very pleasing 8.7%. As we shall come on to as well, the comparatives are not just about sales, which will be a challenge right through until

May 2022 (12% comparative in Q2 FY2022). Whilst so, Morrisons also faces into comparative tailwinds when it comes to mix (high margin food-to-go versus lower margin ambient), Covid costs, which were nearly £300m in FY2021, and fuel sales down by over 60% at the dip, that led to a material working capital outflow."


James Anstead, Barclays

"Morrison is now sufficiently confident to state that it expects a year of ‘meaningful profit growth’ in 22/23 (helped by COVID costs falling further and cafes/fuel making a full year of profit contribution). The company is not specific about what ’meaningful profit growth’ actually means, but we note that company-collected consensus is for 21/22 PBT of £435m and 22/23 PBT of £462m. (Barclays forecasts are for £455m and £480m respectively).

"Morrison also intends to ‘refresh its long-term capital allocation plans’ at September’s interim results. As with the PBT growth comments, it is not totally clear what that means in practice. However, we interpret this to mean that Morrison hopes that the worst effects of the pandemic are now behind the company and it can start to look forward to the (good) problem of allocating capital rather than defensiveness in the pandemic."

© 2021 European Supermarket MagazineArticle by Stephen Wynne-Jones. For more Retail news, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.

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