More reasons to shop at retailer
Jan 11 2007 By Joanna Geary, Business Staff
Supermarket chain Morrisons has continued its recovery with record sales in the week before Christmas.
The Bradford firm said the final week before Christmas gave it a much needed boost following "muted" business in December.
It ensured like-for-like sales at its stores open for a year or more were six per cent higher in the six-week Christmas and New Year period than 12 months earlier.
Morrisons said sales growth excluding fuel was 6.3 per cent in the six-week period. It added control of stock left over after Christmas meant less waste and fewer mark-downs than a year ago.
The strong performance helped resurgent Morrisons maintain the momentum of the first half when it bounced back from its troubled £3 billion takeover of rival Safeway.
Morrisons said like-for-like sales were up 6.3 per cent for the 49 weeks to January 7, having grown 6.6 per cent in the first half.
"These sales results are slightly ahead of our expectations at the time of our interim results," said chief executive Marc Bolland. "However, the group is in the early stage of its profits recovery and the trading environment remains highly competitive.
"The start of the year has been more competitive than ever and I expect that will continue."
Morrisons posted the first loss of its 106-year history last year as the problematic integration of Safeway took its toll.
But it recovered in the first half, with better than expected pretax profits of £134.2 million for the 25 weeks to July 23.
City analysts are fore-casting full-year profits to come in at £289 million but analyst Rob Mann, of Collins Stewart stockbrokers, said he expected numbers to be upgraded.
He said: "Our existing forecast is £312 million, towards the top of the range, and we would expect market numbers to gather in that region."
Shares in Morrisons jumped more than four per cent yesterday to an all-time high, closing up 16.25p at 286.25p.
But, Panmure Gordon analyst Philip Dorgan warned shares had "run too far ahead".
Suggestions next year's profits could almost double were "wishful thinking of the highest order".
Meanwhile, Morrison's announcement was backed by figures denting speculation retailers were forced to discount goods to boost sales over Christmas.
According to the British Retail Consortium, shop prices rose at their fastest annual rate in almost three years in December.
The BRC said mark-ups in seasonal food helped shop prices rise an annual 2.28 per cent, the fastest rate since March 2004.
The report will provide further cheer to the retail sector but set alarm bells ringing at the Bank of England, after the BRC reported sales growth accelerated sharply last month as last-minute shoppers came out in force.
A BRC survey this week showed sales volumes rose 4.4 per cent last month compared with December 2005, while like-for-like sales - generated from the same floor space - rose 2.5 per cent.
"Even allowing for the fact higher food prices significantly pushed up the price index, it indicates the solid growth in retail sales the consortium reported in December was not achieved by major discounting," said Howard Archer at Global Insight.
Profit warnings from mid-market store Woolworths and HMV in December had fanned worries Christmas would be the worst in a generation.
December's rise marked the sixth straight month shop prices have shown a year-on-year increase.
"The BRC price index may well heighten the bank's concern retailers are increasingly seeking to push higher prices," Mr Archer said. "This will add to pressure for a rate hike."
