Thursday 5 May 2016 7:23 am

Morrisons sales nudge up again as management "simplifies and speeds up" business

Morrisons' like-for-likes have risen again, continuing the signs of green shoots emerging from the troubled supermarket.

The figures 

Like-for-likes excluding fuel rose 0.7 per cent in the 13 weeks to 1 May. That follows on from growth registered in its Christmas trading update in January, which was the first time the supermarket had been in positive territory in 16 consecutive quarters. 

Total sales dropped 1.8 per cent, however this was largely down to the planned store closures, and its exit of the M convenience chain. 

Like-for-like transactions rose 3.1 per cent in the quarter, but deflation stood at 2.6 per cent. 

Morrisons' share price nudged up 0.5 per cent in early trading. 

[charts-share-price id="244"]

Why it's interesting

This quarter marks the first year with David Potts at the helm and it's clear that already the supermarket is showing signs of improvement under his leadership. 

Potts has cut back head office staff in order to bring more jobs to the shop floor, hired a new management team and embarked on a major cost-cutting programme, which includes the closure of several stores. 

"We continue to simplify and speed up the business, and improvements we are making to the shopping trip are proving popular with Morrisons customers", the supermarket said. 

However, the retailer is clearly still struggling with the price wars being pushed by budget grocers Aldi and Lidl, which are affecting the wider sector, and in particular the Big Four. 

Yesterday Kantar's figures for the 12 weeks to 24 April, showed that Morrisons suffered one of the biggest declines in spend among the traditional supermarkets.

What Morrisons said

Potts added: "We are encouraged by progress across our six priorities. There is still much to do and our colleagues are working very hard to improve the shopping trip and save customers every penny we can.

"Customers are responding and satisfaction levels remain ahead of last year. We are of course pleased with a second consecutive quarter of positive like-for-like sales, which demonstrates our aim to stabilise trade is taking effect."

What analysts said

Clive Black at Shore Capital said: "Morrisons' chief executive has spoken of the business travelling on a long journey of self-improvement, and this remains the case with much more to do for the business to deliver upon its potential from working or trading its assets harder, be they instore or across its food processing infrastructure.

"However, we do not underestimate the enormous achievements to date by the new management team either, the assembly of which was only completed in December 2015.

"In a patient and methodical manner Mr. Potts has worked his way through a long 'to do' list. Store standards have been improved, product on offer has been enhanced – most recently the chilled ready meals, premium private label lines and an extended free from range – merchandising has been developed and customer service is better. Prices have been reduced in an independent and single minded manner under the Price Crunch' banner, another iteration of which went live this week, whilst promotions are fewer but more impactful in our view.

"Those price cuts alongside the broader instore package are helping Morrisons to compete more effectively, we believe particularly against the limited assortment discounters (LADs)."

In short

It's encouraging to see sustained growth – albeit at low levels – but there is still more to be done before Morrisons can say it is out of the woods.