Although most supermarket brands in the UK are struggling to attract custom at present, Morrisons has consistently been the worst performer out of the “big four”, with its failure to launch an online service until well after its key rivals and minimal focus on dropping prices continuing to impact upon profits.
Analysts predict that this trend will be particularly prevalent in its next trading update, which will reveal exactly how the UK’s fourth biggest grocery retailer performed over the key Christmas trading period.
City experts believe that Morrisons will post a 3.8 per cent plunge in like for like sales for the period encompassing the six weeks to the 4th of January, marking the second Christmas in a row in which Morrisons has lagged well behind the market. Tesco, for example, posted losses of only 0.3 per cent for the period, while Sainsbury’s fell slightly behind with a 1.7 per cent like for like sales drop.
However, even though the prediction may be somewhat gloomy for executives at Morrisons, it represents a growing faith in the grocery chain by analysts. This is because this year’s forecast is well ahead of the 5.6 per cent sales drop experienced by the brand last Christmas, indicating that the improving economy and changes made in the past year at Morrisons are likely to have had a positive impact.
Citi analyst Pradeep Pratti believes that the first step for management following the release of the first quarter results will be to focus upon lowering prices in line with key rivals.
He says; “Both Sainsbury’s and Tesco have reported better than expected Christmas sales and we think Morrisons also would have benefited somewhat from consumers spending a bit more over the holidays.
“The key question for management on Tuesday would be how much Morrisons would need to incrementally invest in prices in response to the raft of cuts announced by all the other big supermarket chains this week.”
The trading updates released by retailers in the past week or so have all tended to stick to the latest retail trend whereby retailers of home wares, electronics and furnishings have fared much better than clothing and grocery brands. However, with major chains including Primark, Debenhams and the Home Retail Group yet to make their official releases, analysts remain cautious about making any firm statements about the success or otherwise of this Christmas for the retail industry as a whole.
Investec analyst Kate Calvert says; “After the first week of trading updates, it should come as no surprise that winners over Christmas appear to be the more housing related, home and electrical categories, with food and clothing having a torrid time.
“Those with the best service and most efficient delivery propositions tended to outperform – this was seen in the John Lewis, House of Fraser and Next updates.”
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