Morrisons dividend decision on hold after sales rise

Morrisons kept its dividend options on hold as the supermarket group reported an increase in like-for-like sales for the first quarter fuelled partly by the Covid-19 crisis.

Group sales at outlets open a year or more, excluding fuel, rose 5.7% in the 14 weeks to 10 May. Including fuel, like-for-like sales fell 3.9%, Morrisons said in a trading update.

The FTSE 100 company said it was keeping options for distributing cash under review after deferring a planned special final dividend in March.

Morrisons said sales were volatile during the period. Business grew in the first few weeks as customers stocked up in the early stages of the crisis but in weeks eight to 11 retail sales fell as store trading hours were reduced and customer numbers were capped.

In weeks 12-14 retail's contribution to like-for-like sales was 9.6% as opening hours returned to normal and customers adjusted their shopping habits, Morrisons said. The first-quarter rise followed three straight quarters of declining like-for-like sales.

Morrisons said the outlook was very uncertain but that its best guess was that Covid-19 costs would be broadly offset by savings on business rates under a government support programme.

In March Morrisons deferred a planned special dividend for the end of its financial year to preserve cash.

In its update Morrisons said: "This continues to be the case, and we are keeping our capital allocation options under review, giving us maximum future flexibility around how we prioritise uses of our strong cash flow.

"Our best estimate is that the 2020/21 costs relating directly to Covid-19 are likely to be broadly offset by the in-year business rates cost saving, but the actual net effect is highly dependent on the length of the crisis and how customers respond as lockdown eases."

Lower fuel sales and the closure of Morrisons' instore cafes will hit the business in the first half whereas business rate relief will come through in the second half.

"We expect the net adverse impact on profit to be considerably more weighted to the first half," the company said.