Morrisons suffered another sharp fall on like-for-like sales at its stores over the past quarter to November 2, when sales fell 6.3%.

Morrisons suffered another sharp fall on like-for-like sales at its stores over the past quarter to November 2, when sales fell 6.3%.

This is yet again another decline that is worse than most market expectations of a fall of 5.2%.

Expectations were fairly low in anticipation of Morrisons’ performance last quarter and there are “some” bright spots in its statement that seems to have captured investors’ positivity.

One of those bright spots is that the like-for-like sales decline does mark a quarter on quarter improvement in sales, after posting a drop of 7.6% in the second quarter.

In this sense, at least the numbers are pointing back to growth as opposed to deterioration.

Morrisons also narrowed its profit estimate for the year to between £335m and £365m, compared to £325m and £375m previously guided.

Whilst the upside potential has been reduced, there is some degree of confidence to come from the fact the lower end of guidance has also essentially been upgraded, despite the mid-point of guidance remaining the same at £350m.

The pace of net debt reduction has quickened to the tune of £100m and the grocer remains confident of generating £2bn of cash and £1bn in cost savings over three years.

The cost saving is crucially important given the structural decline within the sector right now.

The grocery sector today is vastly different from a mere three years ago. Today, convenience shopping with smaller baskets and less net buys has become the trend with consumers hampered by anaemic wage growth.

As a result, shoppers have been increasingly attracted to discount chains such as Aldi and Lidl, which has triggered a price war amongst the UK’s top four chains by sales volume.

This has applied severe pressure on underlying profit margins as food prices slip into deflationary territory.

It’s interesting to note that the number of items on promotion at Morrisons on the quarter was at its lowest in over a year, at 22,150.

This shows Morrisons is becoming more focused on what promotions its runs and on what products in an effort to stretch profit margins wherever possible as it sees less net sales.

That’s positive for shareholders as long as net sales continue to point in the right direction – as the last quarter has shown thus far.

Much now rests on Morrisons’ launch of its Match & More promotion, whereby it promises to match prices of its main competitors including discount chains ahead of the Christmas period.

If this can garner customer loyalty, then there is much here for shareholders to start gaining in confidence.

However, any significant investment within the grocery sector right now is a huge risk given the sector difficulties facing it.

In this sense, any investment may be short term in nature.

  • Warren Ruhomon is an analyst at spread betting firm Finspreads