Although the trumpets were out after Wm Morrison Supermarkets PLC (LON:MRW) notched up its seventh consecutive quarter of like-for-like sales growth today, its shares still shed around 5% as one commentator pointed out that the rate of growth was slower in the second quarter then the first.
In its interim results statement today, Morrisons said that a focus on “improving the customer shopping trip” helped its first half like-for-like sales (excluding fuel) grow by 3%, up from 1.4% growth a year earlier, but lower than the 3.4% growth seen in the first quarter.
READ: Morrisons notches up seventh consecutive quarter of like-for-like growth as recovery continues in first half
George Salmon, equity analyst at Hargreaves Lansdown said: “First half results are solid enough, and certainly above what could have been expected a year or so ago.”
“However,“ he added, “with rivals like Asda redoubling efforts on pricing and UK wage growth lagging behind inflation, one gets the feeling there remains much work to be done.
“Indeed, despite the fanfare around a 7th consecutive quarter of LFL sales growth, we can’t help but notice that the momentum built earlier in the year has faded a touch.”
The Hargreaves analysts continued: “CEO David Potts has certainly got the boat facing the right way, and is already rowing pretty strongly against the tide. However, if conditions worsen, we fear he might need to find some more power from somewhere.”
But strategy also “bearing fruits for the grocer
However, Derya Yildiz, senior analyst at Kantar Retail said Morrisons' interim results show that Potts’ "Fix, Rebuild and Grow" strategy “is bearing fruits for the grocer.”
The analyst added: "The Fresh Look store refurbishment plan has created spacious stores and welcoming fresh counters, while The Best and Eat Smart ranges resonate well with shoppers who don’t want to compromise quality for price.
“But,” she said, “it’s not just the stores themselves. Morrisons’ USPs – vertical integration and sourcing 100% British fresh meat – are more relevant than ever as shoppers try to avoid Brexit-driven inflation or food transparency issues.”
Yildiz continued: “With the recent McColl’s deal for its Safeway brand, Morrisons is finally tapping into the small box scene and doing so without bearing any operational challenges of the convenience channel. The grocer expects wholesale supply sales to be more than £1bn in by the end of 2018.”
She concluded: “Cash-smart strategies and cost-saving measures spare Morrisons time and effort to focus on what matters the most: winning shoppers.”