Morrisons has outperformed expectations with a 2.8% hike in like-for-like sales for the 10 weeks to 7 January 2018.
The supermarket credited the gains to improved availability and a better in-store experience resulting from more checkouts being open and shorter queues.
Danielle Pinnington, managing director at shopper research agency, Shoppercentric, said Morrisons has benefited from shoppers focus on food rather than non-food this Christmas, as well as its work to deliver the ranges and in-store experience that appeals to shoppers.
“As belts tighten shoppers will focus on the essentials – of which grocery shopping is an obvious one. As long as Morrisons continue to focus on meeting shoppers needs then they should be well placed to cope with a potentially tricky year head for retail,” she said.
However, Ken Odeluga, market analyst at City Index, said Morrisons’ update casts only a slightly better light over all-important Christmas retailing after a clutch of disappointing releases in recent weeks, as consumers turn more cautious.
“The UK’s number three supermarket comfortably topped the 1.8% same-store sales rise analysts wanted to see, with growth of 2.8% over 10 weeks to 7 January. Morrisons pointed to initiatives like enhanced in-store services and automated ordering, improving availability and bringing a more attractive customer experience. Morrisons did not however, skim over the effect of “more competitive” pricing. And with shares jumping some 5% initially, only to trade just 1.5% higher by late morning, investors are pointing to concerns that retailers are falling back on less discriminate discounting again,” he said.
“To be sure, there was noise on Tuesday morning from rival sets of grocery data for the festive season. Both Nielsen and Kantar crowned Tesco winner over the final three months of 2017. But it was telling the news didn’t lift the dominant supermarket’s stock. No mysteries here. The bugbears of established supermarkets, Aldi and Lidl, were on the march again, resuming their market share grab during the quarter after a patchy showing last year. They did not take share from Tesco during the quarter. But the time when discounters routinely achieved just that—during the similarly problematic price environment of 2014-2015—is still fresh in investors’ minds. Tesco reports its own Christmas trading on Thursday, following Sainsbury’s on Wednesday.
“True, Morrisons reaffirmed 2017/18 profit guidance of £371m on Tuesday, keeping a floor under pessimism. Its CFO even assured that inflation would “taper down” in the new financial year. That coheres with a broad expectation that price trends have peaked for now. If such projections are correct, large retailers could soon have more leeway to redouble efforts to improve their offerings and calibrating price mixes more sharply.
“Even then, their battle with investor confidence will remain uphill. It’s worth noting the tide of short trades on the sector hasn’t abated much from ‘crisis’ highs over 2014-15, including for Morrisons. After all, efficiency drives and cost reduction only took these groups so far in the face of evolutionary changes in customer behaviour and pricing. Morrisons (and rivals) will almost certainly meet profit expectations. But shares in all three leading grocers face another year of drifting lower, as scepticism sets back in.”