Morrisons, the UK’s number four grocer, is outperforming its rivals “by a nose” and will stick with its expansion plans despite slowing sales, its finance chief said today (6 May).
Finance director Richard Pennycook said the retailer will stand by plans to expand further across the UK even after posting a 0.8% rise in like-for-like sales in the 13 weeks to 2 May.
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Morrisons is looking to invest around GBP2.2bn (US$3.3bn) in the next three years as it looks to a target of covering 1.5m sq ft of space and create 20,000 new jobs.
“[There will be] absolutely no change. We will continue to invest in the future of the business. There are still seven million households in the UK that don’t have a Morrisons close to them,” Pennycook said.
However, the UK grocery sector has seen sales stagnate amid falling food prices and Pennycook cited figures from Kantar Worldpanel that showed space growth was running at 3% and total sales growth of 1.3%.
Like its rivals, Morrisons, the fastest-growing of the largest UK grocers in recent years, has seen its like-for-like sales slow but Pennycook insisted the retailer was still outperforming its rivals.
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By GlobalData“We are ahead by a nose,” Pennycook said, claiming that “there are some negative like-for-likes” among Morrisons’ rivals, although he stopped short of naming who he believed was seeing sales fall.
Nevertheless, Morrisons shares were down 2.3% at 272.3p at 14:20 BST this afternoon amid some negative reaction from City analysts.
“Morrisons first-quarter trading statement was disappointing and an indication that life is tough from a sales perspective. [An] 0.8% LFL is a slowdown on Q4, is below the – recently lowered – whisper range, and causes a downgrade to our full-year forecasts,” said Oriel Securities analyst Jonathan Pritchard, who lowered his recommendation on the retailer’s shares from ‘hold’ to ‘reduce’.
Pritchard added: “Yes, the comparative is tough and industry trading lacks lustre but is it a coincidence that LFL sales growth has gone in one direction only since Mr Bolland left? We think not and whilst we can’t take a strong view on the new CEO, we think that this will continue to be a tough year for Morrisons.”
Former chief executive Marc Bolland is in the middle of his first week at Morrisons’ rival Marks and Spencer, which yesterday announced the resignation of its own finance director Ian Dyson.
Pennycook, Morrisons’ own finance director, refused to “rule in or rule out” any career moves, including re-joining Bolland at M&S. However, Pennycook insisted he “valued” Morrisons and was “very committed” to the business.
Morrisons’ new chief executive, former Loblaw director Dalton Philips, is in his second month at the retailer and is set to first address the market in September when the company publishes its interim results.
