Morrisons performs marginally ahead of expectations as price cuts begin, says GlobalData

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Following today’s release of Morrisons figures for the 2018 Christmas trading period, Thomas Brereton, retail analyst at GlobalData, a leading data and analytics company, comments: ‘‘As the first of the Big Four supermarkets to release Christmas results, Morrisons announced marginally better than expected l-f-l sales over the period, beating analyst expectations of near-flat growth. Morrisons’ newly-found wholesale business continued to prop up overall sales, contributing 3.0% to group l-f-ls and helping to offset lower growth from fuel sales following price cuts towards the end of 2018.

“Morrisons has been unusually quiet in its update, with a notable lack of commentary on the performance of its Best range (of which it launched 250 products exclusively for Christmas) and its online sales (having started southern UK online fulfilment from Ocado’s Erith distribution centre in Q3). And while this doesn’t suggest a poor performance in those areas, the update points towards price cutting as the main source of increasing customers, as Morrisons worked hard to keep the basket price of “key Christmas items” the same as 2017. The Bradford-based grocer has continued in this vein into the New Year, earlier this week announcing that it intends to defend its food & grocery market share (8.3% in 2018) through cutting an average of 20% across more than 900 “store-cupboard favourite” products. With Tesco also announcing price cuts and Sainsbury’s expecting to do so should its merger with ASDA go through, Morrisons may have fired the starting gun in an early 2019 price war in the across the food market.

“Even without this distraction, Morrisons faces an interesting 2019. It is tipped to be the least vulnerable of the Big Four in the event of a challenging Brexit, given its vertically integrated supply model (about 25% of own-label product in produced internally) and growing wholesaler opportunities providing security through diversification. But with pressure mounting from both the discounters and its Big Four rivals, it will need to ensure both organic instore success and development of its immature online business in order to vie effectively for market share. ”