Morrisons reports strong Q1 sales growth

Nick Gladding
Senior Retail Analyst
@RetailAnalysis

Date : 12 May 2020

Morrisons has released strong trading data for the first quarter of 2020/21 as it focused on delivering against its pledge 'to play our full part in feeding the nation'.

Numbers in brief

  • Group LFL ex fuel sales rose +5.7% in the 14 weeks to May 10th, with a retail contribution of 5.1% and wholesale +0.6%
  • LFL growth picked up to 10.8% (retail +9.6% and wholesale +1.2%) over the last three weeks
  • Fuel sales are down 39.3% for the period and down c.70% since the lockdown started
  • Total sales are up 5.7% ex fuel and down 4.0% inc. fuel
  • Two new stores opened (in Amble and Bradwell)

Rollercoaster trading pattern

Following a positive start to the year, retail sales picked up 5.0% for the first six weeks of 2020 before a surge in sales from stockpiling boosted growth further. From weeks 8-11 of the period, sales were flat as customer numbers were capped to accommodate social distancing and Easter celebrations were greatly reduced. However in the last three weeks sales have again been very strong following the restoration of normal trading hours, the rollout of protective screens allowing all checkouts to be opened and the resumption of more shopping trips during the week. This momentum should be further supported by the recent reopening of its in-store counters to provide BBQ and seafood bars and takeaway coffees from its cafes.

Rapid expansion of online

Morrisons.com has nearly doubled its home weekly delivery slots, well in excess of the initially planned 60% increase in capacity, achieved with support from Ocado and expanding store pick operations. Click & Collect is also growing rapidly. From a trial of just six stores in March, Morrisons expects to offer the service from almost 280 stores by mid June. Rapid delivery is also being developed at pace with a new partnership with Deliveroo offering delivery within 30 minutes, complementing the extension of Morrisons reach to most major cities and London postcodes through Amazon Prime Now.

Success with foodboxes

Thanks to its manufacturing facilities, Morrisons was able to quickly launch a food box service using delivering to customers' homes by a third party. 10 boxes have been launched so far including a VE day version (which sold out on the day of its launch), Ramadan and gluten free versions. Tens of thousands of deliveries are now being made each week.

Modest growth through wholesale

While much slower than retail, wholesale has picked up momentum with higher sales to convenience store operators and the recent start of bulk supplies to some local councils, care homes and charities. Wholesale will also benefit from Morrisons taking over the supply to 240 ex-Co-op McColl's stores during 2020.

Outlook

Morrisons has shown great agility in adapting its business to cope with the unprecedented challenges created by Covid-19 and is confident that it can continue to satisfy elevated demand resulting from the shutdown of the foodservice sector. The business estimates that higher operating costs from factors including staff sickness, the recruitment of 25,000 new colleagues and the awarding of a 6% 'thank you' bonus to frontline staff will be broadly equivalent to business rates relief announced by the government in March

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