Christmas Trading Update

Morrisons updated on its top-line performance in the nine weeks ended January 1; this is the majority of 4Q17, which ends on January 29. Comps of 2.9% beat analysts’ expectations of 1.1% for 4Q17, were an acceleration from comps of 1.9% in 3Q16 and represented the company’s strongest performance in the past seven years. Morrisons grew total sales by 2% excluding fuel, 4% including fuel. This was despite the top-line drag of store closures.The company noted that its online operations contributed 0.6% to its comparable sales growth. On a comparable basis, the number of transactions was up 5.2% in the nine weeks, versus 4.1% in the prior quarter, while the number of items per basket fell 5.3%, versus a fall of 5.5% in the prior quarter. Morrisons attributed its strong performance to “improving the offer, becoming more competitive and serving customers better.” It noted good performances in fresh produce; beers, wines and spirits; its premium Best food range; and its Nutmeg clothing brand. This performance and the company’s commentary appear to confirm our expectations that British shoppers traded up in grocery at Christmas 2016: we expect consumers traded up from discount stores to non discounters such as Morrisons, and traded up from regular to premium lines. The market leader, Tesco, reports Christmas trading results on Thursday, January 12, and data today from market-measurement service Kantar World panel suggests Tesco enjoyed a strong holiday period in the UK.

Christmas Trading Update

Morrisons noted that it expects FY17 underlying profit before tax to be in the range of £330–£340 million, ahead of consensus of £326 million. It expects year-end net debt to be around £1.2 billion. Morrisons updates on FY17 performance on March 9. For the year, analysts expect revenues to decline 0.1% to £16.1 billion and EBIT to rise 6.1% to £423 million. The consensus is for GAAP EPS to jump by 25% to 59 pence, according to S&P Capital IQ. These estimates will have been compiled before today’s update.