Supermarket Morrisons has posted a “disappointing” performance across Christmas. Retail Week takes a look at analyst reaction to the news.

Ahead of today’s update from Morrison’s the City was nervous, with an outcome of -2.5% like-for-like widely expected for the sixweeks to Dec 30 and that was indeed exactly what transpired. The main mystery is how Morrison’s still thinks it can “broadly” meet profit expectations for the year, through cost and gross margin control, despite “disappointing” like-for-like sales, but there is no detail on this in the statement, apart from a reference to “self-help”.

The announcement today is noteworthy for the fact that Morrison’s seem to have moved on from moaning about the drag effect of not having strong online and convenience store sales to boost its like-for-like figures, to getting on with catching up the market, with hints of more action to come this year.

It will take a lot of time and effort, however, to make meaningful strides on online and convenience and like-for-like sales are likely to be flat at best in 2013/14, despite the marketing/advertising overhaul that is promised and more store revamps. Nick Bubb, independent analyst

 

This trading statement is grim, but there is no direct profit warning, in part because consensus continues to fall. We see continued downside to consensus profits for full-year 2014 and full-year 2015, given the likely sales underperformance and the costs of entry into new channels. We would have preferred this issue to have been addressed today, which would then allow management to focus on fixing its business, rather than defending an unsustainable level of profit.

We think that Morrisons needs to: (1) Lower long term profit expectations by 20%; (2) Cut capital expenditure by at least 20% (stop over-paying for sites and reduce growth to below that in demand); (3) Announce expansion into food online (this will be loss-making for many years, but Morrison needs to follow its customers); (4) Abandon any plans to do non-food online (other than kiddicare); (5) Re-focus on price message; (6) Clear out the new blood (too many highfalutin recruits means that the Morrison culture has been diluted).  Philip Dorgan, Panmure Gordon

 

Unfortunately for Morrisons, it has found itself squeezed in a market characterised by falling customer loyalty and low volume growth. With the volume of promotional activity intensifying, the grocer has been unable to deliver a strong enough value message.Furthermore, the prevailing northern bias of its store portfolio has left it more susceptible to the general economic malaise.

At the other end of the market, Morrisons does have a strong story to sell to the more affluent consumer, particularly for quality and freshness. However, it is simply not communicating these strengths effectively enough.

Perhaps most pertinently, the grocer has been excruciatingly slow to respond to emerging consumer shopping trends in food & grocery. Convenience and online are where the current growth spots predominately are in the market.

It is imperative that Morrisons seeks to respond to higher price sensitivity among consumers, becoming sharper with its promotional activity. At the same the grocer must seek to communicate its clear strengths; attempting to emphasise a clear point of differentiation to consumers.  Joseph Robinson, Conlumino