3Q18 Trading Update
The UK’s fourth-largest grocery retailer, Morrisons, announced comparable sales were up 2.5% in 3Q18 (ended October 29). The company’s core retail operations contributed 2.1% of this comparable-sales growth, and wholesaling to Amazon and convenience stores contributed 0.4%.
This comp growth marked a slight deceleration from the previous quarter, when total comps were up 2.6%.
Total sales were up 2.3% ex fuel and up 3.2% including fuel in 3Q18.
Shoppers at Morrisons are buying more frequently, but with fewer items each trip. The company noted that comparable transaction numbers were up 2.1% in 3Q18, while the comparable number of items per basket was down 3.6%.
Outlook
The company offered no update to guidance.
Atits half-year results, management had noted the following expectations:
- Net debt is expected to remain below £1 billion for the rest of FY18. In 1H18, the company reduced its net debt by £262 million, to £932 million, which is below its year-end £1 billion target.
- Total annualized wholesale revenues are expected to exceed £700 million by the end of FY18, and wholesale is expected to generate £1 billion in sales “in due course.”
- Total medium-term incremental profits from wholesale, services, interest and e-commerce are now expected to be £75–£125 million, versus previous expectations of £50–£100 million.
For FY18, which ends in January 2018, analysts expect Morrisons to increase revenue by 4.4% to £17.0 billion, and to grow EBIT by 3.2% and pretax profit by 19.9%. The consensus estimate is for GAAP EPS of 13.06 pence in FY18, versus 12.95 pence in the prior year. These estimates were collated before the latest results announcement.
