The first Christmas trading update from a listed UK supermarket group will be released on Tuesday, with Wm Morrison Supermarkets PLC (LON:MRW) set to beat bigger peers J Sainsbury plc (LON:SBRY), Tesco PLC (LON:TSCO) to the punch.
The update comes after Bradford-based Morrisons on Monday said it would cut an average of 20% from the prices of 900 products, including “store cupboard favourites” such as tinned tomatoes, cereal and ready meals.
The fresh price cuts arrive as the ‘Big Four’ food retailers – which includes Wal-Mart Inc (NYSE:WMT) owned Asda, with which Sainsbury’s is attempting to merge - continue to battle against German discounters Aldi and Lidl.
Aldi revealed on Monday that it made almost £1bn of sales last month, marking its best-ever performance over the all-important Christmas trading period driven by “exceptional demand” for its premium ranges as well as an influx of festive customers who would usually shop at other, “more expensive” supermarkets.
Morrisons has “toughest comparatives”
In a recent supermarket sector preview, analysts at UBS said: “The backcloth is mixed. Disposable income is +3.5% year-on-year and unemployment near multi-decade lows.
“But consumer confidence is low, with Brexit uncertainty perhaps having an impact, whilst grocery market growth was sub-1% in November.”
The Swiss bank’s analysts trimmed their forecasts for Morrisons in the note citing the last industry data which suggested slower than expected trading over the key holiday period.
UBS now expects Morrisons - the UK’s fourth-largest grocer - to report sales growth of 0.5% in the final quarter of 2018, down from its previous estimate of 1.8%.
It also noted that Morrisons has the “toughest comparatives” of any of the ‘Big Four’, with the focus likely to be on the performance of its Makes It and The Best own brands.
Negative trend still an issue for SIG
On the second line, insulation specialist SIG PLC will also issue trading news on Tuesday, just six weeks after its last update and covering one of the quieter periods of the year for the FTSE 250-listed group.
In a preview, analysts at Peel Hunt said: “The negative trend seen in the UK during H2 is unlikely to have abated although mild weather in the last few weeks may have helped slightly. French market conditions are the main concern on the Continent given the weaker economic situation."
But, the analysts added: “The softer top line should be compensated by the self-help initiatives the group has underway in terms of cutting overheads back to where they were three years ago and focusing on pushing gross margins ahead by pushing prices up and walking away from low/no margin customers.”
They also noted that SIG recently sold another small non-core business which should improve its net debt position and be helpful to sentiment, with its shares having dropped by 10% in the last three months.
Significant events expected on Tuesday January 8:
Finals: Safestore PLC (LON:SAFE)
Economic data: Halifax UK house price data; US balance of trade; US JOLTS jobs openings; US consumer credit