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Morrisons' sales growth slows at Christmas

Morrisons' sales growth slows at Christmas
FILE PHOTO: A Morrisons supermarket is seen in Weybridge, Britain, August 19, 2016. REUTERS/Peter Nicholls/File Photo   -   Copyright  Peter Nicholls(Reuters)
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By James Davey and Kate Holton

LONDON (Reuters) – Morrisons <MRW.L>, Britain’s fourth largest supermarket, reported weaker-than-expected Christmas sales on Tuesday with growth slowing at both its retail and wholesale businesses, partly reflecting market share gains by discounters Aldi and Lidl.

In turnaround mode since 2013 after the German owned discounters encroached on its low cost turf, Morrisons said it had seen particularly weak demand at its stores in November, although trading improved in December.

Britain’s supermarkets including market leader Tesco <TSCO.L>, Sainsbury’s <SBRY.L> and Asda <WMT.N> have been forced to cut prices after Aldi and Lidl lured cautious customers with their simple and cheap offering.

Market share data released by research groups Kantar and Nielsen on Tuesday showed Walmart’s <WMT.N> Asda achieved the strongest sales growth of the big four supermarkets in the Christmas quarter, but all lost market share to the two smaller challengers.

“Going into November there was just a sense that customers were a bit more cautious, a bit more careful, with their spending,” Morrisons Chief Executive David Potts told reporters.

“A feeling of uncertainty in the country may have led to some of that feeling,” he said.

Morrisons shares were down 2.3 percent at 0833 GMT.

Britons reined in their spending in the last few months of 2018 as concerns grew over the country’s March 29 departure from the European Union. With parliament deadlocked, it is not yet clear whether the country will leave with a new trade deal.

Britons have also had to cope with muted wage growth in recent years, forcing them to rethink the way they shop. Nielsen said the Christmas data showed those changing habits.

“Shoppers (are) now opting to spend less on doing one big shop; instead preferring more frequent, smaller trips to the supermarket, spreading the cost across multiple retailers to increase choice,” said Mike Watkins, UK head of retailer insight.

Morrisons, based in Bradford in northern England, said like-for-like sales excluding fuel rose 3.6 percent in the nine weeks to Jan. 6.

That compared with analysts’ average forecast for growth of 4.1 percent and growth in the previous quarter of 5.6 percent.

Retail sales from its high street stores rose 0.6 percent, compared with 1.3 percent in the previous quarter of the year, while wholesale sales of goods sold to partners rose 3 percent, compared with 4.3 percent in the previous quarter.

Morrisons did, however, stick to its expectations for its full 2018-19 financial year which ends Feb. 3.

“This is Morrisons fourth consecutive Christmas of like for like sales growth during the turnaround,” said Potts.

“Morrisons is well set to keep improving the shopping trip and become more and more relevant for more customers”.

Prior to Tuesday’s update analysts were on average forecasting a 2018-19 pretax profit of 409 million pounds up from 374 million pounds in 2017-18.

(Reporting by James Davey; editing by Kate Holton/Jason Neely/Jane Merriman)

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