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Morrisons jumps as it posts strongest underlying Christmas sales performance for seven years

Morrisons said sales at stores open over a year, excluding fuel, rose by 2.9% in the nine weeks to January 1, smashing analysts’ average forecast for growth of 1.1 %.
Morrisons store
The supermarket group said notable performances came from fruit and veg, beer, wine and spirits, as well as from the retailer's new 'Best' range

Britain's No. 4 food retailer, William Morrison Supermarkets PLC (LON:MRW) saw its shares jump this morning as it posted its strongest underlying sales performance for seven years over the key Christmas period, leading it to raise its profit guidance.

The FTSE 100-listed firm said sales at stores open over a year, excluding fuel, rose by 2.9% in the nine weeks to January 1, smashing analysts’ average forecast for growth of 1.1%, and well above its third quarter growth of 1.6%.

Building on a year of growth under a new management team, the Yorkshire-based grocer also said it now expects its 2016-17 underlying pretax to be in the range £330-340mln, ahead of consensus forecasts.

Morrisons chief executive David Potts said: "This Christmas we made further improvements to the customer shopping trip.

“We stocked more of what our customers wanted to buy, more tills were open more often, and product availability improved as over half of sales went through our new ordering system. Both like-for-like and total sales grew, which was very encouraging."

Shares leap ...

In reaction to the strong update, Morrisons shares topped the FTSE 100 index in early trading, up 4% or 9.4p to 246.8p.

Analyst reaction was also positive.

John Ibbotson, director of the consultancy Retail Vision, commented: "Morrisons has started the Christmas results season with a Magnificent Seven.”
He added: "It's a turnaround that is looking more impressive by the day and the discounters are finally being reeled back in. They're suddenly looking human and are only really taking market share by opening stores.

"Compared to two years ago when Morrisons was on the canvas, the turnaround is exceptional.”

And George Salmon, equity analyst at Hargreaves Lansdown said: “Morrison has taken action on pricing and is now more competitive at the tills, which are ringing more often as the impressive growth in transaction numbers shows."

He added: “With the group enjoying a record week at, and a new automated ordering system helping to improve efficiency by lowering stock levels while still increasing availability, it seems to be finally feeling the benefit of technological advances too.”

Simply the 'Best' ...

Morrisons said notable performances came from fruit and veg, beer, wine and spirits, as well as from the retailer's new 'Best' range and Nutmeg clothing.

The supermarket group said its 'Best' range is proving very popular, with over half of customer baskets including at least one 'Best' item.

Over 100 products were launched under the range especially for Christmas, on top of the 470 products launched in the autumn.

Morrisons is the first of the big food retail players to report Christmas trading, with number one supermarket group Tesco PLC (LON:TSCO) due to provide its update on Thursday, and the second biggest firm J Sainsbury plc (LON:SBRY)  due to report tomorrow.

The UK’s big supermarket groups are currently locked in the midst of a price war to combat the advance of the German-owned discount chains, Aldi and Lidl.

Aldi reported its own Christmas trading news yesterday, saying sales at its UK business rose over 15% in December compared to the same month in 2015.

More to come ...

Tesco shares bounced higher today in tandem with the Morrisons news, adding 3.5% or 7.05p at 208.00p, while Sainsbury's shares gained 1.7%, or 4.3p at 259.1p.

Hargreaves Lansdown analyst Salmon said: “In the wake of this positive update from Morrison, all eyes will now be on the sector’s other big players, Tesco and Sainsbury, when they report later in the week.

“With figures from the BRC painting a positive picture for food sales across the country, hopes will be high that both can follow suit and deliver more positive numbers.”

In a survey released overnight, the British Retail Consortium said a strong Christmas week boosted spending growth in December to a year-on-year rate of 1.7%, up from 1.3% in November.

The BRC said this growth was driven by strong food sales, with non-food sales slow, possibly reflecting fewer clearance sales days after Christmas this year than in 2015.

 -- Adds broker comment, share price --

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