Shares in WM Morrison PLC (LON:MRW) opened lower on Thursday after the supermarket group barely managed to eke out any growth in the first quarter of its fiscal year, while it has also had to delay the expansion of its delivery service.
Britain’s fourth-largest grocer reported like-for-like sales growth of just 0.2% in its stores during the 13 weeks to 5 May. Including its wholesales division, like-for-like growth totalled 2.1%.
READ: Morrisons suspends Erith warehouse deal with Ocado after recent fire
Chief executive David Potts warned earlier in the year of “changes in customer behaviour”, and he repeated today that shoppers are seeking out more bargains as confidence is squeezed by continued “political and economic uncertainty”.
Given the macro issues affecting the market, Potts said the retail sales performance was “robust”, and pointed to the fact that it’s the fourth consecutive first quarter of like-for-like growth.
The wholesale business, which is the new supplier for McColl’s Retail Group PLC’s (LON:MCLS) convenience stores, made “good progress”, with like-for-likes up 2.3% year-on-year.
“We are improving the shopping trip and becoming more competitive for customers, and are pleased with another quarter of positive like-for-like sales,” said Potts.
“We will continue this important work, including on those favourite items we know our customers want to buy at Morrisons.”
Worryingly, Potts doesn’t expect any respite for the retail business in the current quarter, which benefited from the warm summer weather and the World Cup last time around.
Morrisons to move out of Erith after Andover fire
Another concern was a separate statement, which explained that Morrisons will have to move out of the Erith warehouse it shares with Ocado Group plc (LON:OCDO) for a couple of years.
That’s a blow to Morrisons’ online business, which it has been trying to ramp up recently in a bid to adapt to changing shopping habits.
Morrisons accounts for more than 10,000 orders per week at Erith and has a deal to use 30% of the warehouse’s future order capacity.
But in February, a huge blaze broke out at Ocado's Andover warehouse after a robot was set alight by a faulty battery charger.
Morrisons will return to using its share of capacity in Erith in February 2021, and in the meantime it will use in-store pickers to fulfil delivery orders.
Tough time for supermarkets
Morrisons’ numbers point to an increasingly tough time for supermarkets amid the constant pressure from Aldi and Lidl, which keep taking market share from the established players, who have been forced to slash prices in response.
Last week, rival J Sainsbury PLC (LON:SBRY) reported a 0.9% fall in like-for-like sales during the fourth-quarter, which covered a similar period of time.
Before that, Tesco PLC (LON:TSCO) said fourth-quarter like-for-likes in its stores had risen 1.7%, although that was significantly behind the growth seen in the early part of 2018.
By contrast, the German discounters are growing sales by nearer to 10%.
Morrisons shares were down almost 1% to 212p in early deals on Thursday.