Morrisons has reported a sharp slowdown in quarterly sales growth, but forecast stronger annual profits as coronavirus-related costs begin to unwind.
The UK’s fourth largest supermarket chain by market share said like-for-like sales, excluding fuel, rose 2.7% in the first quarter of its financial year to 9 May when compared to the same period of 2020.
That was a time when the country was preparing for, and was tipped into, its first COVID-19 lockdown, with the industry scrambling to secure additional supplies of essentials including flour and toilet rolls as panic-buying took hold.
The sales figure followed growth of 9% in the previous quarter.
The chain described its sales performance as “robust” against the tough comparison, though it highlighted a further £27m of pandemic-related costs due to staff absence and use of marshals during the latest lockdown.
Morrisons, which has lagged behind rivals’ more established online grocery operations, highlighted delivery sales growth of 113% on the same three month period last year and wholesale like-for-like growth of 21%.
It said fuel sales had almost returned to pre-crisis levels, with sales up by more than 17%.
It was a factor behind its prediction that net debt would fall and it maintained its guidance that profit before tax and exceptional items would be higher than the £431m it would have achieved last year, had it not waived £230m of business rates relief.
Morrisons said of the outlook: “We have made a good start to 2021/22, with robust LFL sales against tough year-on-year comparatives.
“In addition, as the period progressed there were encouraging signs both of significantly lower direct COVID-19 costs and of the recovery of profit lost due to the pandemic in areas such as fuel and food-to-go.
“We are also looking forward to the lost profit gradually returning at our cafés from when they reopen next week.”
Chief executive David Potts added: “The pandemic is not yet over, but it is in retreat across Britain and there is much to be positive about as something approaching normal life begins to take shape.
“Our forecourts are getting busier, we are seeing encouraging recent signs of a strong rebound of food-to-go, take-away counters and salad bars, and our popular cafes will soon fully reopen.
“The nation has a summer of socialising and sport to look forward to and we’ll all be able to rediscover the joys of meeting up and eating well together. Whichever way consumers choose to enjoy their renewed freedom, we will be there for them.”
Shares were 0.5% higher in early deals.
Dan Lane, senior analyst at Freetrade, said: “Clear signs of a return to normality will allow a few sighs of relief at Morrisons this morning but the market share battle has only just begun, and they know it.
“As the UK’s fourth favourite grocer, Morrisons has a 10% market share. Five years ago that was 10.6%. Ten years ago it was 12.3%.
“Over that decade, Aldi has added 1.1 percentage points, Lidl has risen by 1.7 and Co-op 4 points.
“The reality is that if the German discounters are going to unseat any of the big four now, it’s going to be Morrisons.”
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