What the analysts say: Morrisons Q4 sales continue slide
Morrisons sliding sales dissected
Morrisons has once again booked a decline in like-for-like sales worse than the overall market, as the group struggles to maintain its share in the face of a highly price-focused consumer. According to management, the "greatest headwinds" that it is facing are its lack of an online and convenience offering. Morrisons has also insisted that it needs to address issues with its marketing and promotional strategies. However, there are those in the City that worry the group's problems do not stem from the way that it communicates its message, but the message itself.
"Quite how management 'steadies' the good retail ship Morrison remains to be seen. We believe that the business has lost touch with some of its core customers but not attracted new ones, particularly as a result of some of the range reviews and arguably Fresh Formats to a degree. Additionally, the business, rather than the present management team, has not been positioned to harvest the few growth areas of the grocery trade through Convenience and Online, albeit is trying to make material advancements on this front - we question Morrison's involvement in non-food. Management highlights an improvement to its promotional innovation and the more effective communication of Morrison's points of difference as being key factors to focus upon." Clive Black, Shore Capital.
"[Morrisons] has been excruciatingly slow to respond to emerging consumer shopping trends in food and grocery. Convenience and online - while representing less profitable channels in the short term - are where the current growth spots predominately are in the market. The grocer is finally making some strides in these areas, with plans to open more convenience stores and a rising likelihood that it will finally launch a full-scale online offer in 2013. However, these developments have been slow, and Morrisons is playing catch up to rivals which are significantly more established in these areas. Morrisons is a soundly run company and many of its current focuses of investment are likely to reap strong rewards in the medium-to-long term. However, with growth in the food & grocery market set to continue to be driven by online, convenience and the discounters, 2013 will be a difficult year to navigate. It is imperative that Morrisons seeks to respond to higher price sensitivity among consumers, becoming sharper with its promotional activity. At the same the grocer must seek to communicate its clear strengths; attempting to emphasise a clear point of differentiation to consumers." - Joseph Robinson, Lead Consultant at Conlumino
"Pressure continues to grow on management, with sales again disappointing. The group's slow adoption of both convenience stores and an online presence has been underlined by management, whilst a lack of promotional innovation and competition from discount retailers such as Aldi has clearly played its part. On the upside, trading is no worse than expected, with the share price marginally higher in early trade, whilst full year profit expectations have at least for now, been maintained. In all, the conclusion appears to be that Morrisons has yet to find its way. Rival discount retailers continue to encroach on its territory, whilst the likes of Sainsbury and Tesco have already firmly established multichannel offerings. For now, with a clear catalyst for a change in group fortunes yet to be firmly identified, analyst opinion remains negative in tone." - Keith Bowman, Equity Analyst at Hargreaves Lansdown Stockbrokers
"Morrison's sales performance continues to lag the wider industry. We think the two key reasons for Morrison's underperformance relative to peers are its lack of exposure to the convenience and on-line segments, currently the fastest growth areas of the food retail industry. Greater dependence on the more challenging market conditions of northern England is a further disadvantage. Management also acknowledges that it needs to improve promotional innovation and the communication of its points of difference (fresh produce and craft skills etc)." - Charles Stanley Research
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