Morrison Holiday Sales Growth Slows More Than Estimated
William Morrison Supermarkets Plc (MRW), the smallest of the U.K.’s four main food retailers, said sales growth slowed over Christmas as competitors fought harder for business, and forecast that 2012 will be tougher than last year.
Revenue at stores open at least a year rose 0.7 percent, excluding fuel and value-added tax, in the six weeks ended Jan. 1, the Bradford, England-based company said today. That compares with the third-quarter’s 2.4 percent gain and missed the 1 percent median estimate of seven analysts compiled by Bloomberg.
Morrison maintained its profit forecast for the year ending this month, while predicting a more difficult 2012 characterized by “low-to-negative” selling volume and constrained consumer spending. The grocer also has to contend with discounting by competitors such as Tesco Plc (TSCO), which extended its Big Price Drop campaign over Christmas. Supermarkets held price promotions on more than 40 percent of goods over the holiday, Morrison said.
“Like-for-like sales growth is slightly disappointing by Morrison’s high standards,” said Philip Dorgan, an analyst at Panmure Gordon. Still, he doesn’t expect any change in consensus estimates and kept a “hold” recommendation on the stock.
Market consensus for annual pretax profit is 920 million pounds ($1.4 billion) to 925 million pounds, Finance Director Richard Pennycook said on a conference call.
Morrison shares were little changed at 311.5 pence at 8:56 a.m. in London trading. They’ve risen 15 percent in a year.
“It was a solid Christmas, in line with the market, and it’s been a very tough market, a very aggressive market,” Chief Executive Officer Dalton Philips said a call with journalists. “Consumer confidence continues to be very low.”
Shoppers are buying one item less per basket, according to Philips, with the volume of sales declining across the market.
The percentage of sales in the seven days before Christmas rose by more than a quarter compared with the previous two years as shoppers delayed purchases until nearer the holiday, he said.
Morrison is the first of the four main U.K. supermarkets to announce Christmas sales. J Sainsbury Plc (SBRY) is scheduled to report on Jan. 11 and market leader Tesco a day later. Industry revenue rose 5.5 percent in the four weeks ended Dec. 24, market researcher Nielsen said in a Jan. 6 report.
Morrison has added an own-brand entry-level range called M Savers, an M Kitchen range of chef-produced ready-meals and opened stores to build sales as consumers’ budgets were hurt by food-price inflation and concern about the economy.
The CEO said “nostalgia was back” this Christmas. Shoppers bought 9 percent more fresh turkeys instead of frozen ones as they delayed purchases until closer to the holiday. Sales of turkey stuffing rose 30 percent. The volume of sparkling wine sold by Morrison over the holiday increased by 156 percent, compared with a 7 percent drop for champagne.
Shoppers returned to “traditional favorites because they just don’t want to risk anything in these economic times,” the CEO said.
Pennycook declined to comment on a report in the Sunday Telegraph newspaper that Morrison is in advanced talks with Carphone Warehouse Group Plc to acquire 11 Best Buy stores to expand its Kiddicare online children’s clothing range to stores.
“We have ambitions for that business, we want to grow it,” he said of Kiddicare.
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