Morrisons reaction: ‘still life in the old supermarket brands yet’

Morrisons has reported sales growth in the first quarter despite Brexit uncertainty hanging over shoppers’ heads.

The grocery chain is the fourth largest after Tesco, Sainsburys and Asda. Picture: Ian Georgeson

In a trading update, the supermarket major said like-for-like sales excluding fuel were up 2.3 per cent in the 13 weeks to 5 May.

The group said “political and economic uncertainty” was continuing to affect consumer confidence, even after an extension to the Brexit deadline.

Sign up to our daily newsletter

The i newsletter cut through the noise

Retail sales growth contributed just 0.2 per cent to the overall figure, while the wholesale business accounted for the remaining 2.1 per cent.

The grocery giant has made significant moves to expand its wholesale business in recent years, with a particular focus on convenience stores.

Following the signing of a supply deal with retailer McColl’s, some of the chain’s stores have been rebranded as Morrisons Daily. A handful of stores at MPK Garages have also been rebranded to either Morrisons Daily or Safeway Daily. Morrisons said both conversions had shown positive early signs, with strong sales growth. Sales in the second quarter are expected to come up against tough comparables due to last year’s football World Cup, which was responsible for a bumper period for retailers.

The group reiterated its confidence in achieving “meaningful and sustainable” growth.

Stephen Martin, head of office at Brewin Dolphin Glasgow, said: “Morrisons has managed to extend its run of quarterly like-for-like sales growth with another good set of numbers in a highly competitive supermarket sector.

“That record now stands at 14 quarters, which is impressive considering uncertainty has dampened consumer confidence for some time now. That said, growth is largely being driven by Morrisons’ wholesale offering and this will likely remain the case over the next few months; although, there will be high hopes for its Daily store offering.

“While sales growth hasn’t quite matched some expectations, this is still a robust performance and, following Sainsbury’s and Tesco’s recent results, it shows there is still life in the old supermarket brands yet.”

Separately it was announced that Morrisons is to suspend part of its partnership with delivery firm Ocado.

The move follows the catastrophic fire at Ocado’s Andover facility in February, which has left the company looking for additional capacity in its existing estate.

As part of a change to the agreement between the companies, Morrisons will hand back its 30 per cent share of Ocado’s fulfilment centre in Erith, south-east London.

In return it will not incur any costs for use of the warehouse and will pay a lower cost for Ocado’s store pick solution, which will continue to fulfil orders from Morrisons.com.

The exclusivity of the deal will also be relaxed, potentially allowing Morrisons to agree a new partnership with another digital player.

Chief executive David Potts said: “Our new agreement allows us to have more than one digital partner, and opens the way for significant potential opportunities and partnerships in this important growth area for Morrisons.”

He added: “We are pleased with another quarter of positive like-for-like sales.”