Holiday Trading Update Morrisons, the UK’s fourth-largest grocery retailer, reported a trading update for the nine weeks ended January 6. Morrisons highlighted that:

• Group comparable sales excluding fuel were up 3.6% year over year, slowing from 5.6% in the prior quarter (3Q19) and below the consensus estimates of 4.1% recorded by StreetAccount.
• Retail comps excluding fuel were up just 0.6%, below the 1.3% growth in the prior quarter, but just ahead of consensus of 0.5%.
• The Wholesale division, which supplies Safeway-branded products to convenience stores and Morrisons products to Amazon, saw its comparable sales increase 3.0%, compared to 4.3% comp growth in the prior quarter and lower than the consensus of 3.6%.
• Total sales increased 4.0% year over year excluding fuel (3.8% including fuel).
• Same-store items per basket increased 0.8%, versus a 1.5% decline in 3Q19.
• Same-store number of transactions declined by 0.9%, compared a 0.2% increase in the prior quarter.

Morrisons noted that the price of its basket of key Christmas items was the same as last year, while customer satisfaction increased significantly. The major areas of improvement were customer service and checkout experience. On the management earnings call, CEO David Potts noted that customer uncertainty on Brexit had likely impacted growth in the period. Morrisons customers showed an increased awareness of how much they would spend on Christmas, he noted, and this applied to both less-affluent and higher-income shoppers. Potts also noted that a slowdown from the autumn may have been partly due to a normalizing of spending growth after a “spend-up summer.” He noted that Morrisons saw a last-minute surge in demand, with an acceleration in spending, in the four days before Christmas. Outlook The company maintained its earlier guidance.At its half-year results, management noted the following expectations:

• £700 million of annualized wholesale supply sales expected ahead of initial end-2018 guidance.
• £1billion of annualized wholesale sales expected “in due course.”
• Further £4 million of incremental profit from wholesale, services, interest and online.
• In the second half, management expects lower costs of both Morrisons.com expansion and accelerated wholesale supply.
• Net debt will remain at a low level, consistent with the company’s capital discipline and the principles of capital allocation.