If this is meant to be a tough time for retailers, nobody seems to have told Morrisons. The supermarket chain recorded an 8.1% jump in like-for-like sales in the third quarter of this year – a remarkable showing at a time when even the all-conquering Tesco only managed a 2% rise. A few years back, in the aftermath of its Safeway takeover, Morrisons looked like a basket case – now it’s leaving some of its more illustrious rivals in the shade…
Today’s figures were another triumph for CEO Marc Bolland, who seems to have done a remarkable job of resurrecting Morrisons’ fortunes since taking over the top job. As well as beating Tesco on the sales front (albeit partly because Tesco has been discounting so heavily), Bolland also casually mentioned today that an extra 700,000 shoppers are coming into his stores every week – more than twice as many as the 300,000 newbies Tesco was boasting about the other day. ‘In this challenging economic environment more customers than ever before are choosing Morrisons,’ said Bolland today, ascribing it to ‘our industry-leading deals and unique fresh food offer’.
Cheap petrol has also helped its cause. By aggressively cutting its fuel (as well as food) prices, Morrisons has clearly been able to tempt more customers into its stores. Indeed, like-for-like sales were actually up 13.3% if you include fuel too, equivalent to a 14.9% overall rise. That’s a pretty impressive figure in any retail climate, let alone this one.
One consequence of all this is that Morrisons now has money to spend. Bolland announced today that if Co-op’s acquisition of Somerfield goes ahead, he’ll be taking 38 small-ish stores off their hands at a cost of about £223m. This will put a £40m dent in earnings in the short term, apparently, but he expects the stores (which will give him another 0.5m sq ft of retail space) to be making a positive contribution by 2010/11. It’s a positive move, which demonstrates that there are real opportunities out there for well-managed companies with money in the bank (apparently Morrisons can afford this deal out of existing cashflow, and still has an untapped £1bn credit facility).
So it’s full steam ahead for Morrisons – well, almost. Bolland refused to get carried away this morning, describing the performance as ‘solid’ and adding: ‘the economic environment is difficult and will remain challenging, but we have confidence in the strength of our value proposition’. But he’ll presumably be feeling fairly pleased with life at the minute. And we doubt Tesco will be losing too much sleep either – after all, its market share is still nearly three times that of its thrusting rival...
In today's bulletin:
Bank slashes rates by another 1%
Morrisons trounces Tesco with 8% sales hike
House prices plunge nearly 3% in November
Editor's blog: Heading for zero
Denise Kingsmill: the end for alpha males?