Morrisons raises profit forecast as sales boom
Supermarket shows it can lift margins as well as sales
Wednesday 22 July 2009
The UK's fourth-biggest grocer, Morrisons, lifted its full-year profit expectations yesterday in an unscheduled update, as its powerful sales momentum feeds through to the bottom line.
The Bradford-based grocer's second-quarter underlying sales, excluding fuel and VAT, are thought to be in line with the 8.2 per cent growth posted for the previous 13 weeks to 3 May, although Morrisons declined to provide a figure. More impressively, the buoyant second-quarter growth was up against one of the grocer's strongest-ever quarters last year.
The update caused City analysts to upgrade their underlying full-year pre-tax profits, from a consensus of £664m to £740m. The upgrade was significant because some City analysts had previously expressed disappointment that Morrisons' juggernaut sales growth over the past two years had not boosted its gross margins more substantially.
Darren Shirley, an analyst at Shore Capital, said: "To our minds, the strong margin progress, which has resulted in material upgrades to forecasts, blows a hole in any concerns around the market that the strong outperformance of the past 18-24 months has been driven by the group 'buying sales'."
Shares in Morrisons jumped by 20.75p, or 8 per cent, to 274p.
The engine room of Morrisons' second-quarter sales was the more than 500,000 additional customers the grocer is attracting through its doors each week. In a statement, Morrisons said: "An increasing number of customers are shopping with Morrisons attracted by the group's fresh offering, keen positioning on price and promotions and its industry leading service and availability."
Along with better-than-expected operating efficiencies from its technology and distribution-centric optimisation programme, Morrisons said it expects the resultant volume growth to lead to a 40 basis points uplift in its gross margin, excluding fuel, for the full year.
Of the City's profit upgrade, about £50m is expected to come from improved gross margins and £20m from additional savings from its optimisation programme, including improvements in its distribution network and self checkout.
Across the country, Morrisons continues to deliver its strongest growth in the South and Scotland, outside its traditional heartland of the North of England. The grocer is thought to vary its product offer by up to 15 per cent, or 2,000 lines, in different parts of the country, catering for the diverse tastes of customers of varying age, wealth or ethnicity, for example.
While Morrisons is delivering growth across its range, sales of its value lines and fresh food – from its Market Street concept of individual outlets, including butchers, fishmongers and bakers in stores – were the star performers.
As part of its long-term expansion plans, Morrisons has this year acquired more than 30 stores from the Co-operative Group, which completed the acquisition of Somerfield in March. It is understood the grocer has already converted 14 of the Co-op's stores to Morrisons and is converting up to five a week.
Grocery market: Morrisons shows rivals clean pair of heels
Further confirmation of Morrisons' momentum came yesterday from TNS Worldpanel, which said the grocer's sales grew by 9.5 per cent for the 12 weeks to 12 July. Its growth outstripped Asda's 8.1 per cent, Sainsbury's 7.7 per cent and Tesco's 5.7 per cent over the period. The market research firm TNS Worldpanel said this was Morrisons' 22nd successive period of market share growth and lifted its overall market share to 11.6 per cent. Meanwhile, Waitrose again impressed with sales up by 8.2 per cent over the 12-week period. Its discount range, Essential Waitrose, has boosted the grocer's sales. TNS's previous comments that food shoppers are reverting back to "pre-recession behaviour" is again borne out by the discounters Aldi and Lidl delivering more subdued sales compared with last year, up by 8.3 per cent and 6.8 per cent respectively over the period.
- 1 Boston Marathon runner's search for mystery man she kissed ends with letter from his wife
- 3 Frankie Boyle on Scottish independence: 'In the Interests of Unity, F**k Off'
- 4 How to gain confidence and maximise your sexual potential
- 5 Chinese theme park sets up 'death simulator' where volunteers can experience being cremated
Saudi Arabia's King Salman sacks senior aide for 'slapping' a journalist behind him live on TV
Boston Marathon runner's search for mystery man she kissed ends with letter from his wife
Frankie Boyle on Scottish independence: 'In the Interests of Unity, F**k Off'
Italian police 'reveal' what Jesus looked like as a young boy
Florida couple forced to register as sex offenders for having sex on public beach
In defence of liberal democracy
General Election 2015: Post-election 'shambles' looms as 70 per cent of voters say SNP 'should not be able to veto UK government policies'
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
General election live: SNP suspends two members for disrupting Labour rally
Schools forced to act as 'miniature welfare states' with teachers buying underwear and even haircuts for poor pupils
iJobs Money & Business
£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...
£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...