Morrisons hails '˜improving' trade after Christmas boost

Morrisons raised its profit guidance following the strong sales performance. Picture: Ian GeorgesonMorrisons raised its profit guidance following the strong sales performance. Picture: Ian Georgeson
Morrisons raised its profit guidance following the strong sales performance. Picture: Ian Georgeson

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Supermarket major Morrisons has reported its strongest performance for seven years in the crucial Christmas period and upped its full-year profit guidance after claiming to have improved the shopping experience for customers.

Scotland’s third-biggest supermarket enjoyed a 2.9 per cent year-on-year increase in like-for-like sales in the nine weeks to 1 January. That compares to a rise of 0.2 per cent in the same period 12 months ago.

Morrisons also said total sales were up 2 per cent in spite of the “continuing impact” of store closures, while like-for-like transaction growth increased 5.2 per cent.

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The group, with about 60 Scottish stores, said it now expects underlying pre-tax profit to come in ahead of consensus in the £330 million to £340m range in the financial year to 29 January.

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Morrisons hief executive David Potts, who joined the business in March 2015 and launched a turnaround programme, said the festive performance was “very encouraging” and benefited from additional improvements made to the customer offer.

Potts said: “We stocked more of what our customers wanted to buy, more tills were open more often, and product availability improved as over half of sales went through our new ordering system.”

Neil Wilson, senior market analyst at ETX Capital, praised Potts for driving a “hugely successful” turnaround, and expected the firm to post its fifth consecutive quarter of sales growth despite sector headwinds.

It came as data published yesterday revealed grocery price hikes in UK supermarkets for the first time since 2014. Kantar Worldpanel figures for the 12 weeks to 1 January found that like-for-like prices jumped 0.2 percentage points, bringing a return to inflation after 28 months of deflation in the market.

Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said: “The long-anticipated return to inflation suggests that the speed of growth in the overall market will continue to hasten in 2017, and both consumers and retailers will be looking at ways to avoid increasing the cost of the weekly shop.”

Kantar also found that supermarkets enjoyed a record Christmas, with consumers spending around £500m more last month than in December 2015.

Separate Nielsen figures also showed supermarkets saw their best Christmas trading period for four years.

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In terms of Morrisons’ outlook, Wilson said 2017 could be harder “as year-on-year comparisons are going to be measured against 2016’s solid performance”.

Its update came in advance of festive updates from competitors Sainsbury’s today and Tesco tomorrow. Mike van Dulken, head of research at Accendo Markets, said Morrisons could herald “more of the same”, or could “merely serve to highlight how much better it is doing versus its bigger rivals”.