Morrisons dancing in the aisles after cracking Christmas

Supermarket Morrisons has emerged as the big winner of the Christmas price war, with an 8% jump in sales...

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Last Updated: 06 Nov 2012

No question who won the big Christmas food fight: supermarket chain Morrisons said today that its sales jumped 8.2% on a like-for-like basis during the six weeks to January 4 – a bigger gain than Tesco, Sainsbury and (probably) Asda. Morrisons not only boosted sales of its discount range, but also sold more of its high-end products by attracting customers from its upmarket rivals. And best of all, it did all this without shrinking its profit margins. It’s another impressive display by Morrisons and its yet-to-put-a-foot-wrong CEO Marc Bolland – but its share price still slipped this morning...

Morrisons was widely expected to win the supermarket battle this Christmas, and it certainly delivered. Overall sales were up 9.4%, while like-for-like growth was towards the top end of analyst forecasts. According to Bolland, Morrisons pulled in an extra 2.2m customers during the festive period, and it looks as though some of these were deserters from M&S and Waitrose: sales of fresh fruit and veg were up, and remarkably, it even managed to shift more organic products than last year (an area that seemed sure to be hammered by the downturn). More predictably, sales of its discount range were also up 70% during the period.

Today’s results mean that Morrisons’ sales growth is well ahead of larger rivals Tesco (up a relatively modest 2.5%) and Sainsbury’s (up 4.5%). There have been no official figures from Asda, but market researchers reckon its sales jumped about 7% over the Christmas period, leaving Bolland and co. top of the class. Admittedly Morrisons is starting from a smaller base than these other three, but an 8.2% jump on what was a strong performance last year is not to be sniffed at. Only the discounters fared better: for instance, graduates’ favourite Aldi recorded a 15% jump in underlying sales (although again from a much smaller base). Some analysts reckon Morrisons is now starting to gain ground on Sainsbury’s in terms of market share.

So given all that, why on earth did Morrisons’ share price sink today? Well, it’s perhaps not as perverse as it sounds. For a start, Bolland was pretty coy about prospects for the coming year: ‘We remain cautious on the outlook for consumer spending and we expect the market to remain challenging,’ he said today (perhaps he'll revive his predecessor Sir Ken's habit of checking all the bins every day for stock thrown away unnecessarily). And the worry is that it won’t be able to maintain this kind of momentum: full-year profits are still on target, but with Tesco set to slash prices again to claw back market share, it’ll be tough for Morrisons to keep taking this much business off its rivals.

Still, let’s not be too churlish: this is still a mightily impressive set of trading figures. And as far as Bolland’s concerned, worries like these probably fall into the ‘high-quality problem’ category...


In today's bulletin:

Morrisons dancing in the aisles after cracking Christmas
Autonomy in a class of its own
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