2015 wasn't a great month for Morrisons, the under-pressure supermarket chain that was ejected from the FTSE 100 last month. But today there are signs of green shoots.
Its total sales excluding fuel dipped by 1.2% in the nine weeks to January 3, but that was largely the result of selling off its 140-strong M Local convenience store chain. Stripping those out, Morrisons’ like for like sales edged up 0.2% - hardly a stunning figure but a unusually good result for a sector in turmoil.
Investors were certainly taken by surprise – the supermarket’s share price soared by almost 10% this morning to 167.5p. That’s still well down on where it was two years ago but it will no doubt have left chief executive David Potts feeling pretty happy about his first Christmas in charge.
‘We are pleased with our improved trading performance over the Christmas period,’ Potts said. ‘While there is of course much more to do, we are making important progress in improving all aspects of the shopping trip, and our customers tell us they are pleased with the changes.’
It's not all positive news though. Sales growth is all well and good but the supermarket price war has squeeze profit margins hard. Morrisons has slashed prices by an average of 7% over the past two years and only eked out that 0.2% boost because of a 1.3% increase in transactions. It has already closed 11 stores and today said it plans to shutter seven more.
The grocer has focused heavily on its core supermarkets, ignoring the sidelines like fashion, restaurants and homewares that its rivals have been investing in. Eschewing distractions might seem like a good idea but John Ibbotson of consultants Retail Vision suggests the strategy is a bit short-sighted.
‘Sticking to the core proposition of big superstores mainly in the north of England without a convenience or expanded non-food internet offer gives Potts few options for returning to growth,’ he said.
Unofficial figures released by Kantar Worldpanel this morning don’t look good for Morrisons either. The market research company said the grocery market had declined by 0.2% in the 12 weeks to January 3rd, and that Sainsbury’s was the only major supermarket whose sales were up (by a not-too-shabby 0.8%).
The research suggested that Morrisons’ sales were down 2.6% in the period, although that’s skewed slightly by the sale of M Local. Tesco’s sales were down by 2.7% in the period and Asda’s were down 3.5%, so things are looking pretty glum for the big chains.
It’s the same old story at the smaller end of the industry – Aldi’s and Lidl’s sales were up by 13.3% and 18.5% respectively, and Waitrose notched up sluggish growth of 1.5%. With such fierce competition and in a struggling industry, it seems Morrisons is far from out of the woods yet.
‘It’s fair to say that, of the Big Four, Morrisons is the least likely to pull through,’ Ibbotson added. ‘Morrisons entered the Christmas period in near critical condition but despite these surprise numbers it remains in intensive care.’