Morrisons shares punished after sales fall more than rivals

Morrisons has become the only ‘Big 3’ UK supermarket chain to report a significant deterioration in sales accelerating the crippling slowdown it faced last year.

Britain’s fourth-largest grocer said on Thursday that like-for-like sales (sales at stores open over a year) fell 2.9% in the 13 weeks to 3rd May, Wm. Morrison Supermarket’s fiscal first quarter.

That compares with a fall of 2.6% in the last quarter of 2014, though the Q1 result was 0.1 of a percentage point above the average analyst expectation.

Whilst a different time frame was involved, Morrisons’ Q1 sales trend seems in line with data published a day ago by retail industry research firm Kantar Worldpanel.

Kantar found that whilst Sainsbury’s retail sales fell 0.2% during the 12 weeks that ended on 26th April and Tesco’s declined 1%, Morrisons’ fell the most—by 1.1% compared to the same period a year ago.

Whilst bearing in mind the timing of Easter this year and that Tesco edged MRW by just a fraction, Morrisons’ marginal underperformance of the latter and a more significant one against its closer listed rival Sainsbury’s together place it in a disadvantageous position in the UK grocery market.

Additionally, Morrisons’ official sales tally does nothing to allay the concern that it’s managing to stem the further decline, even if its retailing contraction has slowed since a like-for-like sales tumble of 7.1% in the first quarter a year ago.

The problem is, the magnitude of last year Q1’s collapse also provided an easy comparable for the supermarket to beat, adding a further order of relative slack to its performance.

As we’ve seen over the last year, during which UK supermarkets’ losses from the attack of the German discounters have come to a head, even marginal or relative gains by the Big 3 (or Big 4 including ASDA) will be applauded by investors.

The reverse applies too.

That helps explain the severe battering being meted out to Morrisons’ stock as this article was going online.

The shares traded 7% lower at 176p.

I see the stock now close to recognisable support; though there’s a risk that the market might be more comfortable with better corroborated support between 170p and 172p, especially in view of the divergence of current trading from longer-term momentum (see the MACD chart at the bottom).