Shares in ‘Big Four’ grocery chain Morrisons (MRW) gained 3% to 195p after the firm posted a 5.7% increase in group like for like sales excluding fuel in the three months to 10 May.
Retail sales contributed 5.1% to the increase, while wholesale revenues contributed the remaining 0.6%. Fuel sales were down 39% on a like for like basis during the quarter, and down roughly 70% since the introduction of the lockdown in March as customers made fewer car journeys.
ONLINE SALES BOOST
Morrisons reported that retail sales had been ‘on an improving trend’ coming into the quarter, and in early/mid-March it experienced ‘considerable stocking up and sales pull-forward’ as the virus spread.
Sales turned briefly negative year on year over Easter, which was ‘not the normal occasion’ as the firm put it, but in the last two weeks of the quarter they accelerated by almost 10% as shoppers spread their visits out rather than concentrating them at weekends and continued to fill their baskets.
At the same time, online demand has grown rapidly with home delivery slots at Morrisons.com doubling. The number of store-pick outlets, operated with partner Ocado (OCDO), has increased substantially, and from June the firm hopes to offer a click-and-collect service from around 280 stores.
The Amazon Prime Now same-day home delivery service has also been expanded significantly, and by the end of May should be rolled out to 40 stores covering most major towns and cities.
The firm has even formed a partnership with Deliveroo to help meet demand, with grocery delivery available from 130 stores to cater for the huge increase in people cooking at home.
WINNING COMBINATION
Morrisons has ‘emerged from a tumultuous Q1 FY2021 in good shape’, according to analysts Clive Black and Darren Shirley of Shore Capital.
‘Learning has been rapid, the group has been agile in the face of volatility but also exceptionally innovative. We believe that the wholehearted effort of Morrisons is resonating well with all stakeholders and whilst trade is boosted by channel shift there could be ongoing benefits to the business in what are likely to be tough economic periods ahead.’
Despite lost fuel sales and higher operating costs as the firm adjusts to the crisis, Shore is keeping its current year earnings forecast. ‘Morrison has its mojo, is relevant and set to be more so in the future’, add the analysts.
