Morrisons lifts third quarter with 'biggest ever' Halloween

Wm Morrison Supermarkets reported its fourth consecutive quarter of growth, helped by its strongest ever Halloween.

Like-for-like sales in the three months to 30 October increased 1.6%, or 3.4% including fuel, lifted by 4.1% growth in transactions, prices being 1% lower and seasonal Halloween sales its "biggest ever" with around a 20% jump year-on-year.

Although LFL sales growth was down from the 2.0% in the second quarter, it was stronger than the 1.4% from the first half as a whole and beat the 1.4% consensus forecast.

Total sales excluding fuel in the third quarter fell 1.2%, which reflected the sale of its convenience stores last winter.

"Our like-for-like sales have now been positive for a year, which is thanks to the hard work and dedication of the whole Morrisons team," said chief executive David Potts.

"There is a lot more we plan to do. We will keep investing in becoming more competitive and improving the shopping trip, and I am confident we will serve our customers even better during the important trading period ahead."

Investment in the period included the successful launch of 'The Best' premium range as a result of customer research, with many more products to be introduced in the run-up to Christmas, which bodes well for margins.

House broker Shore Capital said the performance compared favourably with its own forecast range of 1.0-1.5% and noted that online sales contributed 0.9% to the LFL growth.

This meant Morrisons has now delivered two quarters of LFL growth across its store base, if stripping out online.

"We believe it is still early days in the Morrison’s recovery story, noting the group has yet to annualise its improved sales momentum and so deliver growth on growth," analysts wrote, keeping their full year profit forecasts unchanged post the update, still looking for PBT of £330m and EPS of 10.6p.

These forecasts which have remained unchanged for 14 months, which supports their view that "Morrisons, and indeed much of the industry, has stabilised after a very challenging five years".

ShoreCap also highlighted the short position remains very high at 16.8%, "which could provide a major pressure point if our expectations are delivered".

John Ibbotson, at retail consultancy Retail Vision, noted that while the rate of growth was still be modest, Morrisons was finally making a habit of growing.

“Four straight quarters of rising like-for-like sales is no blip, and the once flailing brand has definitively turned the corner with these expectation-beating results. CEO David Potts’ back to retail basics approach – in which stores have been spruced up, with more local ranges and lower prices introduced – is beginning to pay dividends and tempt back shoppers.

While Morrisons lacks the scale of Tesco and sees its market share continue to slip in the face of cut-throat competition, he said the falling pound may hurt Morrisons less than its rivals, as a high proportion of its food is produced in the UK.

“Morrisons’ return to its roots – of low prices, good value and fresh food – is finally helping it fight back against the discounters. Sales are up, but against a backdrop of intense competition, food inflation, lower margins and lower returns on capital, it will have to fight for every penny of profit.”