Supermarket major Morrisons has rung up a better-than-expected 3.6 per cent hike in sales thanks to a resilient performance in its stores and at its burgeoning wholesale arm.
The UK’s fourth biggest grocery chain notched up its tenth quarter in a row of rising group like-for-like sales and defied expectations of a slowdown in growth after the sector was battered by the Beast from the East cold snap in March.
But the group remained tight-lipped in the first-quarter update on the proposed £12 billion merger of rivals Sainsbury’s and Asda, which will spark one of the biggest shake-ups in the supermarket sector since Morrisons itself took over Safeway 14 years ago.
The tie-up will create a supermarket titan bigger than Tesco with revenues of £51bn and a network of 2,800 Sainsbury’s, Asda and Argos stores. The deal is certain to face lengthy scrutiny by competition regulators.
In its update, Morrisons said supermarket and online sales growth eased slightly to 1.8 per cent in the 13 weeks to 6 May, cooling from 2 per cent in the previous three months, but this was still better than forecast.
The group said it was “now open for business as a wholesaler”, with the division largely behind the impressive performance, with sales up 1.8 per cent – a surge from the 0.8 per cent seen in the previous three months.
Chief executive David Potts said: “We are pleased to have made a strong start to the year, again becoming more competitive for customers while delivering growth on growth. We expect to continue to improve in the year ahead.
“During a busy period of exciting new ranges, new store openings, strong supermarket and wholesale growth, and the peaks and troughs of the seasons, our colleagues once again did an outstanding job for customers.”
On the outlook, the group told investors: “As announced at our recent preliminary results, we expect net debt to continue to fall during 2018/19, although first-half phasing will be impacted by the timing of payroll payments due to last year’s 53rd week.
“Our expectations remain unchanged and we are confident of another strong year ahead.”
Analysts have praised the turnaround plan being led by Potts, including his recent launch of the cut-price Wonky vegetable range and wholesale push through deals such as that with McColl’s.
Morrisons held onto its market share at 10.5 per cent in the most recent industry data from Kantar Worldpanel, while Tesco remained at 27.6 per cent, and Sainsbury’s and Asda both lost ground at 15.9 per cent and 15.5 per cent respectively.
Clive Black, director, head of research, at Shore Capital, said: “Morrisons’ Q1 trading statement represents a beat to expectations and is the tenth consecutive quarter of positive like-for-like sales growth, maintaining the ongoing self-improvement of the group.
“Total life-for-like sales (ex-fuel) rose by 3.6 per cent (Shore Capital estimate 2.5 per cent).”
He added: “Morrisons is a group that is increasingly in control of its own destiny, robustly positioned for any Asda-Sainsbury’s combination (should it happen).”