1Q18Update

Morrisons reported impressive top-line growth in 1Q18. The company grew comparable sales ex fuel by 3.4%, marking an acceleration from 2.9% in the previous quarter. Comps included contributions of 3.0% from retail and 0.4% from wholesale, which includes its agreement to supply groceries to Amazon. Comps came in ahead of the 1.1%–2.0% estimates range recorded by S&P Capital IQ. Total sales were up 2.8% ex fuel and up 5.8% including fuel. The company noted a positive contribution from comparable volumes, “with more customers shopping more often at Morrisons.” An expanded premium food range and the extension of its Nutmeg womenswear offering to more than 50 stores also supported sales growth.

Outlook

Company guidance remains unchanged. This includes year-end net debt of less than £1 billion. For FY18, analysts expect Morrisons to grow revenues by 3.4% and EBIT by 4.4%. Consensus calls for underlying diluted EPS to climb 13.8% to 12.21 pence.