Analysts' view
Morrisons’ Christmas results ‘disappointing’
“While all of the big supermarkets have been starved of sales by a decidedly ungenerous grocery growth rate, Morrisons is the one that looks most undernourished,” according to Neil Saunders, md of Conlumino.
Clive Black, director and head of research at Shore Capital, said: “Given the comparatives, we deem this to be a disappointing update and Morrisons is still the worst performing of the big four superstore groups.”
David Gray, retail analyst at Planet Retail, called the results “underwhelming if improving” and showed there was “still much work to do for the beleaguered Bradford-based grocer”.
‘Main loser’
Saunders said: “Recent years have seen it slim down considerably and with a significant loss of market share it has emerged as the main loser in the grocery wars.”
The fact that it had announced plans to close 10 stores today (January 13) was testament to the fall of the business, Saunders stressed.
“Given the long run of decline and the lack of an effective recovery plan, it is inevitable that Dalton Philips had to go,” he added. Black welcomed the fact that the arrival of Andrew Higginson as chairman had been brought forward to January 22.
Morrisons’ like-for-like sales in the six weeks to January 4 had improved on previous quarters last year, conceded Saunders. But he pointed to the latest British Retail Consortium figures indicating the entire grocery market had improved over Christmas.
‘Deteriorated sharply’
“As such, Morrisons is merely reflecting a wider trend,” he said. “Moreover, compared to last Christmas, Morrisons’ sales performance has actually deteriorated sharply.”
Similarly, Gray said: “Representing one of the worst declines among the so-called UK big four over Christmas, Morrisons’ results are being impacted by the double-whammy of falling food volumes alongside stagnant food price inflation.”
He also pointed to continued pressure from the growth and success of discount store chains Aldi and Lidl.
Challenging year
Facing a challenging year, Morrisons remained vulnerable to competitors, with Tesco “seemingly making some headway”, Saunders concluded. “The new team will have their work cut out to put Morrisons back on a level footing.”
Black said Morrisons was now in a good position to deliver positive trading results over the next two years, with 2016 full-year (FY 2016) performance to be set against weak previous results.
“Comparatives for FY2016 are extremely favourable and, frankly, if Morrisons cannot deliver a positive trading out-turn against like-for-like sales that fell by seven to eight per cent for much of the current financial year then it is questionable as to whether the business ever will,” he commented.
For an in-depth run-down of Morrisons’ Christmas trading performance, click here.
