Morrisons enjoys some 'remarkable' Christmas cheer

CEO says supermarket has found its ‘mojo’ after having best Christmas in seven years thanks in part to new premium ranges

Morrisons had its best Christmas for seven years after the supermarket chain revamped its premium ranges, opened more tills and cut fewer prices.

Britain’s fourth-largest retailer reported a 2.9% increase in sales excluding fuel in the nine weeks to 1 January, with fresh fruit and vegetables, beers, wine and spirits, and its new upmarket The Best range faring well. Sales of Morrisons’ Nutmeg clothing range were up by 30%, while performance was lifted by a 0.6% rise in online sales, partly thanks to its tie-up with Amazon.

It was Morrisons’ biggest quarterly sales rise at stores open for more than a year since Christmas 2009, and well ahead of the 1.6% growth reported in the previous quarter.

Total sales excluding fuel went up by 2%, the first rise since November 2013, despite store closures over the year.

David Potts, the chief executive of the Bradford-based supermarket, said stores had been more prepared to meet demand than in previous years, with better-stocked shelves and improved service.

“We are delighted to have found our mojo,” he said. “Every year does bring its challenges, but so far we haven’t seen any change in consumer sentiment. Customers splashed out over Christmas and wanted to trade up.”

He said the company had sold 50,000 packs of “shimmering macarons” and sold out online of a Christmas tree-shaped chocolate gateau before it could reach stores, as shoppers snapped up 100 new premium festive products. “The Best was a gamechanger for us this Christmas,” Potts said.

But he insisted that Morrisons had done better “across the board”, and the sales increase was to do with more than premium food and cheap alcohol.

“We are becoming more relevant to more people as we turn the company around,” Potts said.

David Potts
David Potts, the chief executive of Morrisons, hailed its extra Christmas preparation and improved service for the results. Photograph: Mikael Buck

Morrisons’ figures were also underpinned by a big drop in price deflation. The company said its prices were down by only 0.2% during the Christmas period, compared with a 1% fall in the previous quarter.

The squeeze on prices was felt across the whole market, with grocery prices rising by 0.2% in the 12 weeks to 1 January, the first inflation in just over two years, according to market data released by Kantar Worldpanel on Tuesday.

But Trevor Strain, the Morrisons chief financial officer, said: “Despite commodity pressures, our Christmas basket was still very competitive.”

Morrisons is thought to have outperformed its major competitors, but smaller chains including Aldi, Iceland and the Co-operative also did well over the Christmas period.

The Co-op announced on Tuesday that sales increased by 3.5% at stores open more than a year in the three weeks to New Year’s Eve. The convenience store group said its biggest-selling line was own-label prosecco, but frozen ready meals and fresh produce also sold well.

Phil Dorrell, a partner at consultancy Retail Remedy, described the Christmas sales jump at Morrisons as “quite remarkable”.

“Potts has turned this ship around and while navigating a big tanker like this takes time, his grip on the tiller is both clear and strong. Morrisons’ Christmas marketing campaign was fresh and delivered a relevant food quality feel,” he said.

Bruno Monteyne, an analyst at Bernstein, said: “This strong result reflects good execution by Morrisons as customers lost over the past few years come back to stores.

“We also expect it to reflect an overall strong Christmas by UK food retailers, with this result boding well for Sainsbury’s and Tesco results later this week.”

Potts said: “This Christmas we made further improvements to the customer shopping trip. We stocked more of what our customers wanted to buy, more tills were open more often, and product availability improved as more than half of sales went through our new ordering system. Both like for like and total sales grew, which was very encouraging.”

The company raised its full-year guidance following the better than expected festive trading season. It expects underlying pretax profit for the full 2016-17 year to be between £330m and £340m, ahead of analysts’ expectations of about £326m.

Morrisons maintained its guidance that net debt would be about £1.2bn at the end of the financial year.

Morrisons’ share price rose by nearly 4% following the upbeat update, which also helped boost Tesco’s shares by nearly 6% and Sainsbury’s by 1.6%.


Sarah Butler and Angela Monaghan

The GuardianTramp

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