Morrisons set to be Christmas winner
‘Golden quarter’ will reflect tough retail conditions
MORRISONS is set to take the Christmas crown this week, as it is expected to unveil the best quarterly sales figures of all the listed supermarkets.
This week Morrisons, Sainsbury’s, Tesco and Marks & Spencer will publish their trading updates for retail’s end of year “golden quarter”, which includes the key Christmas period. The figures will be closely watched by the market, as the retail sector is suffering from the effects of slower consumer spending, with November being especially tough.
Shore Capital head of research Clive Black said: “Everyone suffered a setback in November. It was chronically bad. Our sense is that there was a pick up for food retailers in December, who benefited from an extra shopping day as Christmas was on a Tuesday. Overall though, we expect figures to be subdued compared to previous years.”
Morrisons will kick things off on Tuesday and analysts believe it will say that its likefor-like sales grew 0.5 per cent. Under chief executive Dave Potts, the supermarket giant has been revitalised after years of haemorrhaging sales and customers. The following day Sainsbury’s is expected to report that its sales for the quarter either stalled or went into reverse. Analyst estimates range from flat sales growth to a fall of 0.3 per cent.
Bernstein analyst Bruno Monteyne said that Sainsbury’s figures are likely to be weaker than its peers as discounters Aldi and Lidl have been opening stores in regions that it traditionally dominates and that its pricing is not as competitive. “That drives underlying grocery weakness that could make it the weakest over Christmas,” he said.
Jefferies analyst James Grzinic said: “We model for Sainsbury’s to report Q3 like-forlikes of minus 0.3 per cent reflecting our assumption of a softening in both grocery and general merchandise sales. In particular, we see the latter contracting a little. We assume clothing sales to have fallen slightly, mostly reflecting challenging industry conditions from November.”
On Thursday, Tesco and M&S will reveal their trading figures. Tesco will say sales at its UK stores saw modest growth, while M&S is likely to report further falls in clothing and food sales, according to City analysts.
Although Tesco’s UK business is poised to deliver a 12th quarter of consecutive growth, thanks to the turnaround efforts of chief Dave Lewis, its overseas businesses are still likely to be struggling.
“For all the positive strides, in many ways it is a case of one step forward, one step back at the moment,” George Salmon, equities analyst at Hargreaves Lansdown, said.
Black predicted that sales at M&S food and clothing and home divisions would both be down by 2.5-3 per cent. He added that although chief Steve Rowe and chairman Archie Norman are presiding over a revamp of the business, it will take time to bear fruit given the difficult trading environment.
He said: “We reiterate the time needed to see through the group’s plans and near-term expectation of flat-lining earnings, and point out that M&S remains materially profitable.”