Morrisons expect profits hike despite decrease in sales

Morrisons expect profits hike despite decrease in sales

Supermarket Morrisons is expected to ring up a hike in annual profits on Wednesday as its wholesale arm helps it weather the impact of a tougher consumer backdrop.

The UK’s fourth biggest supermarket is set to reveal a 9% rise in underlying pre-tax profits to £407 million, up from £374 million the previous year.

Its results will be watched closely for the final fourth quarter sales out-turn, after it reported slowing retail sales growth for the first nine weeks covering the all-important Christmas season.

Like-for-like retail sales slowed sharply to 0.6%, down from 1.3% in the previous three months.

But like-for-like sales overall rose 3.6% thanks to a 3% contribution from the wholesale division, which includes tie-ups with McColl’s and Amazon.

Retail experts at Barclays believe comparable sales will continue to rise 3.6% in the fourth quarter as a whole, with retail sales growth edging up to 0.8% and wholesale nudging lower to 2.8%.

They expect the fillip from the wholesale side to continue to ease back, with sales growth from the operation peaking at 4.3% in the third quarter.

The results come as the £12 billion mega merger between rivals Sainsbury’s and Asda has been left on the brink of collapse after the competition watchdog said it could block the deal unless they sell off significant stores or even one of the brands.

As well as sending shares in FTSE 100-listed Sainsbury’s tumbling, it also knocked Morrisons as investors fretted over the outlook for

consolidation in the grocery sector and the prospect for rivals to snap up offloaded stores.

The Share Centre said: “As ever, recent sales numbers at its core retail business will be important.

“Competition concerns are not going to go away and management initiatives will take time to execute; there is also fading hopes of the group picking up stores from the Sainsbury/Asda proposed merger.”

Morrisons bosses are likely to be questioned on the general consumer outlook, amid mounting signs retail spending is starting to show the strain of Brexit uncertainty.

But the latest industry data from Kantar Worldpanel showed grocery volumes rising by a stable 1.2% in the four weeks to February 24.

Kantar also said a survey suggested one in 10 shoppers claim to have started stockpiling food to prepare for a no-deal Brexit, although it added this has not yet been borne out in the till roll data.

The figures showed Morrisons saw its market share fall to 10.5% from 10.6% a year ago, although it estimated sales growth of 0.8% in the 12 weeks to February 24.

Morrisons joined peers in January by cutting the prices of 935 products by an average of 20% in a bid to attract budget-conscious post-Christmas shoppers.

Tesco also launched a range of deals to celebrate its centenary year, slashing prices on household staples, as the sector continues to face intense competition from discounters Aldi and Lidl.

-Holly Williams, Press Association