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Morrisons Q3 Results: What The Analysts Said

Published on Nov 3 2016 11:00 AM in Retail tagged: Trending Posts / Morrisons / Barclays / Shore Capital / Kantar Retail / Bernstein

Morrisons Q3 Results: What The Analysts Said

UK retailer Morrisons will be pleased to see an uplift in its like-for-like sales in the third quarter, with a 1.6% increase recorded on the same period the previous year. Here's how the analysts saw it.

Himanshu Pal, Vice President at Kantar Retail

"Morrisons’ renewed focus on simplified pricing (like its Price Crunch initiative) and fresh credentials (particularly its own label range) continues to gain traction with shoppers. Although recent results have been encouraging, David Potts isn’t taking the foot of the pedal with the retailer looking to further strengthen its shopper value proposition with a series of initiatives. These ideas are a step in the right direction, especially as the tough trading environment shows no signs of abating. But Morrisons will have to watch out not only for the ever-present discounter threat but also a resurgent Tesco, and suppliers who will look to seek higher prices during commercial negotiations to compensate for rising input costs."

Darren Shirley, Shore Capital

"We are pleased that the positive LFL momentum has been sustained, with ex VAT, ex fuel LFL sales increasing by 1.6% as Morrison delivered its 4th consecutive quarter of positive LFL growth. The Q3 performance is a little ahead of our forecast range of 1.0 – 1.5% and a consensus expectation of 1.4% (source: Bloomberg) and compares favourably with the 1.0% H2 instore LFL currently baked into our forecasts, noting that comparatives toughen by 2.7% to 0.1% in Q4. Online sales contributed 0.9% to the LFL growth, which also means Morrisons has now delivered 2 quarters of LFL growth across its store base (stripping out online)."

Barclays European Food Retail Equity Research

"The fact that LFL sales including fuel were up +3.4% (despite quite limited fuel inflation) suggests that Morrison is having some success with keeping fuel prices very competitive and driving traffic into store. Transaction numbers were up +4.1% (vs +4.3% in 2Q) and items per basket were down -5.5% (vs -5.0% in 2Q).
The decline in items per basket looks significant at first glance but we would not dwell on this too much as it seems to be driven mostly by the company’s focus on driving more ‘food to go’ sales (smaller baskets) and on running fewer promotions that forced shoppers to consolidate baskets in order to qualify."

Bruno Monteyne, Bernstein Research

"This is the fourth consecutive quarter of positive LFL growth after 15 quarters of negative growth. Positive LFL sales were up against a deflationary headwind of -1.0%, broadly in line with Kantar's inflation measure of -0.8%. Total sales excluding fuel declined -1.2%, 10 bps below consensus of -1.1% but 80bps better than our estimate of -2.0%. Implies space impact of Morrisons store closure programme of -2.8% slightly worse than consensus of -2.5%. Once again, Morrisons has significantly beaten Kantar, which implied -3.1% total growth for Q3. This means that the gap to Kantar implied growth has grown from +1.1% in Q2 to +1.9% in Q3."

Tom Berry, Verdict Retail

"After too many years of rushed, poorly executed decisions, Morrisons is now building on a string of well-chosen initiatives based around its Fix, Rebuild and Grow strategy. The introduction of its The Best premium range contrasts its longer running, but also successful, Price Crunch scheme and should drive sales growth as confidence is restored in brand quality. Investment in better understanding its client base and their needs has proven pivotal for the retailer, exemplified by 20% sales growth in Halloween, though Verdict data shows that Asda is the destination of choice for consumers. Confidence coming from the retailer’s revival, coupled with a shrewd side deal with Amazon for fresh groceries and own brand products allowed Morrisons to renegotiate its agreement with Ocado, reducing the fees it pays the online pureplay. Investment in the Morrisons brand name, along with delivery capabilities continues to drive substantial growth for the retailer’s online business, though it lags behind rivals in terms of scale."

© 2016 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. To subscribe to ESM: The European Supermarket Magazine, click here.

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