Morrisons Christmas surge lifts shares to all-time high

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The Independent Online

Wm Morrison beat its own expectations with strong trading over Christmas, prompting analysts to upgrade profit forecasts for the third time and sending its shares to an all-time record.

In the space of just 12 months, the Bradford-based group has been transformed. The City expects it to make annual pre-tax profits of up to £320m, a 9 per cent upgrade, compared with losses of £313m a year ago.

The group said like-for-like sales rose 6.3 per cent excluding petrol during the six weeks to 7 January. An extra day's trading boosted the figure compared with last year by around 1 percentage point, analysts estimated.

Morrisons benefited from a strong month for grocers. Figures from TNS, the research group, showed that the industry grew by 5 per cent during December.

Marc Bolland, who arrived from Heineken as chief executive in September, said: "The trade came very late but when it did we were ready. Operationally we were in better shape." Sales were strong "countrywide", he added, laying to rest any lingering doubts about Morrisons' appeal to customers in the south.

Shares in the group leapt 6 per cent to 286.25p, making it the best performer in the FTSE 100.

Analysts drew most comfort from Morrisons' tight control on stock, which bodes well for its margin recovery. It marked down 20 per cent less food, resulting in a fifth less wastage during the post-Christmas week than last year. Andrew Kasoulis, at Credit Suisse, said: "It emphasises how much more efficient the business has become."

Mr Bolland said a return to Morrisons' promotional heritage, strong sales of fresh produce and a 40 per cent increase in demand for its upmarket lines had all driven its performance.

He said the grocer would seek to remain competitive against the price cuts announced in the past 10 days by Tesco, Asda and J Sainsbury. "We might lead them in some instances. We don't like to be followers," he added.

Mr Bolland is expected to increase the group's gross margin target when he reports on his strategic review in March. For now, Richard Pennycook, the finance director, said there was no change to the previous guidance that it expected to lift its gross margin by 90 basis points by its financial year-end in four weeks' time. That would be two years ahead of its initial target.

Philip Dorgan, at Panmure Gordon, retained his negative stance, calling it "wishful thinking of the highest order" to assume the shares merit their valuation.

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