UK supermarket group Morrisons has booked a "disappointing" set of results for the quarter to 30 December, with trading over the key Christmas period lagging the overall weak market.
In its trading update, released this morning (7 January), Morrisons said like-for-like sales in the three months dropped 2.5%. Total sales were down 0.9%.
Morrisons said the decline was the result of its failure to effectively communicate its point of difference to consumers and added that its promotional activity has also been off the mark. In November, the company first identified these issues and said it was taking action to sharpen its use of marketing and promotions.
However, today the group also spoke of a more fundamental shift in shopping patterns - the "accelerating importance" of "other channels", such as online and convenience. Evolving shopping patterns are an issue that the entire UK retail sector has had to grapple with, resulting in declining store profitability.
Conlumino consultant Joseph Robinson said the company has been “excruciatingly slow” to respond to these trends.
However, he added: “The grocer is finally making some strides in these areas, with plans to open more convenience stores and a rising likelihood that it will finally launch a full-scale online offer in 2013.”
Morrisons has increased its investment in convenience operations and plans to have opened 70 convenience stores by the end of the year. The group is yet to launch an online business.
Looking to the full-year, Morrisons said it anticipates trading conditions to remain tough, but added that it expects results to be in-line with expectations.
Despite the downbeat sales update, Morrisons share price edged up 0.18% in early trade today.
Show the press release
Wm Morrison Supermarkets Plc provides a Christmas Trading Update
Trading
The environment over the Christmas period has continued to be challenging with hard pressed consumers increasingly shopping to a budget and vouchering a prominent feature of a highly promotional market. Against this backdrop and the increasing growth of other channels, we have sought to deliver a balance of top line performance and returns.
In the 6 weeks to 30 December total sales* excluding fuel were down by 0.9% (0.5% including fuel). Like for like sales* declined by 2.5% (2.2% including fuel).
Notwithstanding these difficult market conditions, which we expect to continue through 2013, our sales performance in the period was disappointing. This reflects both the need to improve our promotional innovation and the communication of our points of difference, as we highlighted in November, and the accelerating importance of other channels, such as online and convenience, which Morrisons has only recently entered. However we continued to maintain good availability and high standards of service throughout the seasonal peak, a reflection of the continuing strength of our supply chain and the commitment of our colleagues.
The Group’s financial position remains strong and we expect full year net debt to be in the range of pound 2.1bn - pound 2.2bn. Our two year programme to retire pound 1 billion of equity, originally announced in March 2011, is well advanced. To date we have acquired 329m shares at a total investment of pound 931m.
Commenting on Morrisons Christmas trading, Chief Executive Officer, Dalton Philips said;
“Our 130,000 colleagues have done an outstanding job serving our customers great value food this Christmas and I would like to thank them for their dedication and hard work. In a difficult market our sales performance was lower than anticipated, but we have a strong business and significant opportunities to advance our strategy, as we accelerate our multi-channel offer”.
Outlook
2012 was difficult for the consumer and the sales environment has proved to be challenging. Through the self help available to us we have managed our business tightly and accordingly the Board believes that our full year performance will be broadly in line with its expectations.
