Morrisons raises profit forecast as sales boom

Supermarket shows it can lift margins as well as sales

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.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Arts and Entertainment
Frank Turner performing at 93 Feet East
musicReview: 93 Feet East, London
News
Toronto tops the charts across a range of indexes
news

World cities ranked in terms of safety, food security and 'liveability'

Extras
indybest
Voices
A mother and her child
voices
Voices
The veterans Mark Hayward, Hugh Thompson and Sean Staines (back) with Grayson Perry (front left) and Evgeny Lebedev
charity appealMaverick artist Grayson Perry backs our campaign
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee