Morrisons’ 14 consecutive quarters of growth set to end
Morrisons is set to end its three-and-a-half-year run of continuous growth next week as supermarkets continue to struggle with tough competition and squeezed profits on the high street.
The grocer will update the market on Thursday, and analysts predict a 2% fall in like-for-like sales for the second quarter of the financial year. For the last 14 consecutive quarters, sales had been rising.
Pre-tax profits for the half year are expected to hit £192 million, compared with £188 million during the same period a year ago.
Investors in Morrisons have had a tough year, with shares hitting a three-year low, dropping 28% since February.
Retail analysts at Berenberg pointed out that the fall could be due to the Asda – Sainsbury’s merger collapsing, with Morrisons hoping to benefit from store disposals by the rivals.
They added “we remain positive about Morrisons” pointing out the growth in Morrisons’ wholesale business – selling food and drink direct to Amazon and McColls, and its hefty 7% dividend yield.
However, there was more pessimism from Russ Mould, investment director at AJ Bell.
He pointed out that the supermarket has been losing customers to discounters Aldi and Lidl, which have a combined market share of 13.6% versus Morrisons’ 10.1%.
He added: “Weak consumer confidence may be one reason for the slide, concerns over Brexit and what it might mean in terms of tariffs, costs and supply chains could be another but the real crux of the issue may be competition.”
Chief executive David Potts will also be able to speak about the supermarket’s preparations for Brexit in the unique position of being both a retailer and a food producer.
The retailer already has the necessary paperwork to continue sending its products to the EU in the event of a no-deal, but there are concerns that fresh food could be held up coming the other way.
City watchers can also expect to hear updates on the supermarket’s push into wholesale, with ambitions to hit £1 billion in sales via the division, and the roll-out of its new service with Amazon to offer same-day delivery.