Morrisons hammered despite 6% sales growth

Lower food price inflation means slower sales growth for Morrisons - but it's hardly a basket case.

by
Last Updated: 06 Nov 2012

Not the best start for Morrisons as it faces up to life without Marc Bolland, the ex-CEO who’s just started his new job at M&S: its share price plunged by more than 3% this morning, after the supermarket said sales growth slowed last quarter. Now admittedly total sales were actually up a very healthy 5.9%. And the main reason for the drop in like-for-like sales growth - to 0.8% - was that food prices were flat. But when you’ve been doing as well as Morrisons, even a slight slackening of the pace is considered a step backwards…

Morrisons said the slowdown – which it said was wholly expected – was due to lower commodity prices and the ‘virtual elimination of food inflation’. In other words, it can’t rely on gradually increasing food prices to keep its sales figures climbing. In this respect, of course, it’s no different to any other supermarket in the industry. All of them have been warning that with food prices likely to remain pretty flat this year, there's little or no chance of them repeating last year’s sales growth this time around. So this kind of result shouldn’t come as a huge surprise.

On the other hand, there’s a temptation to link this to the vacuum of leadership at Morrisons since Bolland hung up his greengrocer’s apron at the back end of last year (before putting his feet up in the garden and awaiting his M&S start date). Morrisons then spent several months without a CEO, until it appointed new boss Dalton Philips, a former Wal-Mart exec, to the top job in March. Bolland received lots of plaudits for his efforts in transforming Morrisons, and the City is clearly nervous that his successor won’t be able to repeat the trick. This nervousness about what happens next presumably helps to explain the (seemingly exaggerated) effect on the share price of today’s figures.

But nobody should write off Morrisons just yet. It’s built considerable momentum over the last couple of years: last year’s sales growth of 6% was pretty impressive, while it also opened 45 new stores and racked up more than £850m in profit. And although nobody seems to know very much about Philips, it’s worth remembering that the same was true of Bolland when he took the Morrisons job four years ago...


In today's bulletin:
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Morrisons hammered despite 6% sales growth
Dyson quits M&S to take (very) hot seat at Punch
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