Morrisons has unveiled robust trading in its first quarter, with “sales growth well ahead of the market”, it claimed.
Like-for-like sales for the 13 weeks to May 3 rose 8.2 per cent. The retailer attributed the performance to product innovation coupled with an extension of its Value range and the impact of its Price Crunch discounting campaign.
Charles Stanley analyst Sam Hart said that Morrisons’ update was “stronger than expected” and “well ahead of industry peers”. However, he warned that sales growth is expected to slow later this year as “food price inflation drops away and comparatives become tougher”. Hart pointed out that while Morrisons was strongly promotional during the quarter, margins are running at the same level as last year, owing to supplier markdown funding, particularly on branded merchandise.
Numis analyst Andy Wade was less bullish, rating the stock a hold against Hart’s accumulate. He also highlighted the potential problem of slowing food price inflation and said: “We do not expect Morrisons to maintain this level of like-for-like growth through the year.” He added that Numis “would continue to favour a long position in Tesco or a short position in Sainsbury’s”.
Morrisons said that its outlook for the year remains unchanged.