1Q20 Update Morrisons reported its 1Q20 trading update for the 13 weeks ended May 5, 2019:

• The company reported group same store sales growth of 2.3% excluding fuel, below the consensus estimate of 2.5% recorded by StreetAccount, with retail contributing 0.2% and wholesale 2.1%.
• Including the fuel, group same-store sales grew 2.7%.
• Morrisons grew its total sales 2.4% year over year excluding fuel, and 2.9% including fuel.
• The company achieved positive first-quarter comps for the fourth consecutive year.
• Comparable sales during the Easter period grew 1.7%.

David Potts, Chief Executive, said:

We are improving the shopping trip and becoming more competitive for customers, and are pleased with another quarter of positive like-for-like sales. We will continue this important work, including on those favorite items we know our customers want to buy at Morrisons.

Morrisons also provided an update on its partnership with Ocado and per the new agreement:

• Ocado will have sole access to the new Erith customer fulfilment centre (CFC) until January 2021, giving Ocado extra capacity following the recent fire at the new Andover CFC.
• Morrisons will be able to use the Erith CFC in February 2021, at the pre-agreed proportion of Erith’s capacity.
• Until February 2021, Morrisons will incur neither start-up nor running costs of the new Erith CFC.
• After February 2021, the CFC is expected to be operating at higher capacity, and Morrisons will then be able to ramp up its online orders more quickly and cost effectively.
• During 2019 and 2020, Morrisons.com expects to grow by accelerating new store pick capacity and through the Dordon CFC.
• Ocado will no longer be Morrisons’ exclusive digital partner: Morrisons said it expects to see other significant opportunities, more strategic flexibility and more profitable growth.

Outlook The company said it believes the market will remain challenging, while it remains confident of many sales and profit growth opportunities ahead, and expects growth to be meaningful and sustainable. In its FY19 results, the company set the following targets for FY20:

• To begin supplying McColl’s remaining 300 convenience stores towards the end of 2019, and expect £1 billion of annualised wholesale supply sales in fiscal 2020.
• £12 million incremental profit from wholesale, services, interest and online, taking the cumulative total to £54 million. The company believes it is on track for its £75-125 million profit target.
• To hit its target of £1.1 billion in disposal proceeds.

In FY20, consensus estimates recorded by StreetAccount predict Morrisons will report revenues of £18.24 billion, up 3.1% year over year, and EPS of 13.9 pence.