Morrisons said today (19 November) that its sales growth was dented by lower food inflation in the third quarter, but insisted that its high growth rate was sustainable for the “foreseeable future”.
Speaking to media during a conference call this morning, outgoing CEO Marc Bolland said that like-for-like sales growth, which came in at 4.3%, was impacted by falling commodity prices that resulted in lower retail price inflation.
“Inflation has come out of the market in the past 16 weeks incredibly,” he commented.
The prices of all major commodities have eased, Bolland said, with wheat costs down 20% and potato prices down 15%.
“Fresh has gone down in price. This is good for the customer and good for us because it is the first thing you see when you go in the store.”
Bolland said the lower price of fresh products had increased their appeal, resulting in volume growth in categories like fresh pasta.
Morrisons finance director Richard Pennycook added that while fresh products are in deflation, “overall the balance is just about neutral”.
“We expect that to remain the case for the remainder of the year,” he said.
While ID sales lagged competitors – with Asda and Sainsbury’s posting gains of 5.6% and 5.4% in their most recent quarters – Morrisions’ total sales remained ahead of the market, with growth standing at 9.1% excluding fuel.
Management said that its lower comparable sales than its rivals was the consequence of lower inflation in the period measured, tough comparables with last year when the company saw same store sales jump 8.2% and the weight of new sales to recently opened stores.
“We said a while ago – back in ’09 – that the balance of our growth would move to new space as we expand in the south,” Pennycook said.
Morrisons has opened 37 new stores so far this year, the company revealed.
Bolland also insisted that Morrisons’ sales growth was less promotionally driven that its rivals.
“The quality of growth is important. We have seen more promotional participation in all the market and Morrisons has not been at the front of this. The sales growth of others has been driven by promotions. Our sales growth is driven by a combination of promotions and background growth. None of our competitors can say that,” he insisted.
Bolland announced yesterday that he would be leaving Morrisons to take the helm at Marks and Spencer in January.
Commenting on his departure, Bolland said that he was confident in the existing management team’s ability to drive continued growth without him.
“The business is in great shape. The strategy is clear and the success is there,” he said.
Sir Ian Gibson, the chairman of Morrisons as well as the company’s nominations committee, said that the company would expect to appoint a replacement sometime in the New Year.
However, he added: “The team we have here is running the business very successfully, with a clear strategy… We are not in any sense of panic.”