Morrisons chief executive Marc Bolland today (22 January) insisted that the UK retailer’s margins “held up nicely” over Christmas as concerns over the company’s profit outlook weighed on its shares.
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The UK’s fourth-largest retailer saw its sales growth outpace its nearest rivals over Christmas, with like-for-like sales, excluding fuel, rising by 8.2% during the six weeks to 4 January.
The performance compared to UK like-for-like sales growth of 2.5% from Tesco and 4.5% from Sainsbury’s but Morrisons shares still slid this morning after the company kept its forecast for annual profits unchanged.
Shares in Morrisons stood at 253.25p at 12:40 GMT, a fall of 4.2%.
Bolland said Morrisons had held its profit forecast as the retailer had factored in the effect of its Christmas promotional activity into its outlook. He said Morrisons had gained customers from “all our major competitors, particularly in the south”.
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By GlobalDataBolland added: “We have grown more affluent customers from premium retailers who are interested in buying the fresh best food.”
Analysts, however, expressed concern that Morrisons’ growing sales may have come at the expense of margins.
Keith Bowman, an analyst at stockbroker Hargreaves Lansdown, told just-food that Morrisons “may have raised long-term doubts as to its profit margins”.
Bowman said: “Morrisons’ management expects current analysts’ profits forecasts to be met but it has raised concerns that the growth in sales has come at additional price promotional activity. ‘What’s happening to the profit margin?’ is the question being asked.”
Nevertheless, Bowman said Morrisons’ like-for-like sales growth was at the top end of expectations. “I’m not sure the company could have done much more. It has beat its rivals over the Christmas period and its value orientations sits well with the stance of consumers in the current economic outlook.”
Bowman warned, however, that Morrisons could find it hard to match the share gains it had enjoyed in recent months. “The comparisons will get harder going forward,” he added.
Despite these concerns, Bolland was upbeat about Morrisons’ prospects, pointing to the retailer’s fresh food offering under the Market Street banner. He refused, however, to be drawn directly on whether he though the retailer could continue to gain market share.
“We have been extremely consistent. We have focused on fresh and value and we have continued to work on that. The Market Street concept is certainly something that sets us apart.”
