Morrisons catches festive cold as supermarket reporting season starts

The number four supermarket chain, the first of the big four to unveil its New Year trading statement, is grappling with falling sales and a loss of momentum

Morrisons has reported fall sales (PA)

Has David Potts lost his magic wand?

The Morrison’s CEO was hired to run Britain’s number four supermarket chain when it was on its knees. There were real questions about whether it could hang on in the absence of a deal.

Potts changed the narrative, overseeing a remarkable turnaround and earning rave reviews in the process. Deservedly so. But of late there has at the very least been a loss of momentum.

The festive numbers, the first to emerge from one of the traditional big four supermarket groups, underlined that. Sales were down 1.7 per cent, excluding new openings and fuel sales over the 22 weeks to January 5, with Potts citing “an unusually challenging period”.

The wholesale business, which supplies McColl’s and petrol station operators, slowed. Fuel sales were impacted by heavy promotional activity with Morrisons' offer getting negative reviews when compared to rivals.

The City reacted calmly, even marking the shares up a bit.

Bad news had been priced in. The City was primed for something nastier still and its cockles were warmed by the company reiterating that profits will be “within the current range of analysts’ forecasts” with four weeks to go.

Tight control of costs, which always gets a cheer in the square mile, limited the impact of sliding sales on the bottom line.

Potts are trying to spark up the business. Store revamps continue. Ones in unfavourable locations are closing their doors. Replacements are opening where prospects are better. New formats are being trialled. Ideas too. The swanky Canning Town branch with its barista bar, food to go service, on site florist, has garnered positive reviews.

Morrisons is nothing if not busy. But it has to be.

Aldi and Lidl continue their relentless growth and at the rate it’s going the former, which unveiled some typically robust figures yesterday, has the number four position in its sights, although it still has a way to go.

The growing trend of people doing their main shop online hurts Morrisons because it’s weaker there, a legacy of previous mismanagement, notwithstanding the supply deal with Amazon that created a lot of excitement when it was unveiled.

Next year the company won’t have to run quite as fast to stand still because the comparatives from this year will be weaker. Maybe it won’t feel the need to play games: the latest update covers 22 weeks compared to last year’s five making it tough to compare the two.

Potts declared that the group has a “strong plan”. He surely needs one. It’s tough out there and it isn’t going to get any easier.