Morrisons’ Christmas probably as lacklustre as its rivals’

<p>Morrisons will release its Christmas Trading Update tomorrow (13th January). The supermarket will be the last of the ‘Big Four’ chains to provide sales figures […]</p>

Morrisons will release its Christmas Trading Update tomorrow (13th January).

The supermarket will be the last of the ‘Big Four’ chains to provide sales figures covering the winter holidays—in Morrisons case the six weeks to 4th January—and it faces a bar that has actually been raised by its rivals, at least relatively.

After their sales updates last week, both Tesco and Sainsbury’s were able to suggest they might be on the verge of stabilizing grocery sales following attacks from upstart discounters which had intensified last year, resulting in consecutive quarterly market share losses.

Last Wednesday, Sainsbury’s said like-for-like sales (a key measure for the sector, using sales from stores open more than a year and excluding fuel sales) fell 1.7% in the 14 weeks to 3rd January.

Analysts were expecting a fall of at least 2.5%.

Then last Thursday, Tesco said its own same-store sales fell 2.9% in the 19 weeks to 3rd January, better than consensus forecasts and a significant improvement compared with a decline of 5.4% in the second quarter.

Only Marks & Spencer like-for-like sales disappointed, with a 5.8% fall in the thirteen weeks ending 27th December, when the market expected -3%. M&S said it ran into unexpected glitches at its new distribution centre.

Still, Marks remains the only listed UK supermarket group to post like-for-like food growth for two quarters in a row, albeit that growth has been anaemic, between 0.1% and 0.2%.



Morrisons’ grocery pulse keeps slowing

As for, Morrisons, the last time its grocery pulse was taken, the business was very much alive—but continuing to ebb.

Morrisons was found to be the worst-performing supermarket of the Big Four, behind Sainsbury’s and Asda, while Aldi and Lidl market shares continued to rise, according to monitoring firm Kantar Worldpanel, in its most recent report from a regular series on UK supermarkets.

In the 12 weeks to 7th December, Morrisons saw a 3.2% drop in sales—implying ramped-up pressure on its CEO, Dalton Philips, after a surprise profit warning last Christmas.

Kantar noted retailers increased promotional activity into the winter holiday season leading to like-for-like prices falling by 0.7% compared with the same 12 week period  in 2013.



Where does Morrisons stand?

Despite its recent distribution problems, Marks & Spencer continued to show benefits from its better calibration to the ‘upper bracket’ food segment in its trading update last week.

In the same way, John Lewis Partnership’s Waitrose chain, generally regarded as occupying the same ‘upmarket’ space in the grocery sector, posted a 2.8% rise in same store sales over the five week Christmas period.

This underlines another pressing issue for Morrisons—it can’t really be thought of as being fully geared to the ‘discount’ end of food retail, dominated by the likes of Aldi and Lidl, nor the ‘value’ offering, largely claimed by Asda, and Morrisons is certainly not oriented to so-called upmarket shoppers either.

The most recent figures from Morrisons itself showed a 6.3% like-for-like sales fall in its third quarter to 2nd November.

The supermarket stated then that it would “take time for our initiatives to fully benefit our sales performance”.



Market pessimism comes off lows, will shares follow?

Still, consensus forecasts of the firm’s gross revenues for the quarter containing the Christmas period have been rising in recent weeks.

An average of forecasts compiled by Thomson Reuters at the beginning of November showed the market expected Morrisons’ revenue for the current quarter to tank by almost £2.8m.

But this pessimism had moderated by last week, with the forecast decline in revenue seen as more moderate at less than £2.7m.

Even so, bearing in mind the promotional picture—and also media reports suggesting Morrisons has, like its major supermarket rivals, been selectively increasing prices on certain food items in a bid to limit the effects of unprecedented discounting, there’s little reason to expect Morrisons’ same-store sales to improve much compared with the same period a year ago.



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