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Morrisons (MRW) has announced its group like for like sales (excluding fuel) fell 1.7% in the 22 weeks to 5 January as “challenging” trading conditions and “customer uncertainty” hit trading momentum.

In the 22 week period, like for like retail sales fell 1.7% while wholesale revenues were flat.

Group like for like sales including fuel were down 2.8%, while total sales were down 1.8% excluding fuel and down 2.9% including fuel.

Its third quarter (the period 5 August to 3 November), saw like for like sales excluding fuel fall 1.2%, comprising of a 1.1% fall in retail sales and a 0.1% fall in wholesale revenues.

Morrisons said that “trading conditions remained challenging and the customer uncertainty of the last year was sustained” through the period.

It said it continued to invest in the Morrisons price list while managing costs well, with its basket of key Christmas items “very competitive” as most prices were the same as or lower than last year.

Its fuel sales were affected by a highly promotional market.

In wholesale overall growth was impacted by the lower total sales at McColl’s. Sales at the first ten conversions from McColl’s to Morrisons Daily convenience stores are strong, however, and the pair plan to extend the trial to another 20 stores during January and February to further tailor and test the proposition as they begin to transition McColl’s remaining ex-Co-op stores to Morrisons wholesale supply.

CEO David Potts said: “It was encouraging that during an unusually challenging period for sales, our execution was strong and our profitability robust, demonstrating the broad-based progress we have made during the turnaround.

“This was again down to the hard work of Morrisons exceptional team of food makers and shopkeepers. As always, we will take some learnings into the new year, and look forward to 2020 with a strong plan and solid foundations on which to continue to grow.”

Depsite the sales falls, Morrisons said it managed costs well throughout the period and still expects 2019/20 profit before tax and exceptionals to be within the current range of analysts’ forecasts.

During the period it opened four new stores (including two replacements), closed four underperforming stores, and launched another 25 Fresh Look stores bringing the total to 44 this year.

It also recently sold its Camden store and eight acre surrounding site to Berkeley Group for a total consideration of £120m. Berkeley will pay £85m in stages over the years of the project, and will build a new Morrisons supermarket and convenience store on the site at a cost to Berkeley of around £35m.

Morrisons shares are up 2.9% to 198p in early trading as the sales slide was less severe than some analysts had expected.

Morning update

UK supermarkets experienced their worst Christmas period since 2014, according to market share figures from Kantar and Nielsen.

Kantar found that year-on-year supermarket sales grew marginally by 0.2% in the 12 weeks to 29 December. While retailers still took a record £29.3 billion through tills – up £50 million on last year – 2019 saw the slowest rate of growth over the Christmas period for four years.

The slow market made it particularly difficult for the largest retailers to increase sales.

The ‘big 4’ grocers were especially impacted by customers choosing to make one fewer trip to stores in the latest period. Sales at Sainsbury’s (SBRY) fell by 0.7%, while Tesco (TSCO) sales were 1.5% lower. Asda and Morrisons also saw sales fall by 2.2% and 2.9% respectively, with their market shares also dropping.

Lidl was the best performing physical supermarket, with sales up 10.3% in the period, while Aldi’s sales were up 5.9%. There was also 3% growth in the period at Co-op and 1.3% at Iceland.

Fraser McKevitt, head of retail and consumer insight at Kantar explained: “There was no sign of the post-election rush many had hoped for in the final weeks before Christmas, with shoppers carefully watching their budgets. In fact, many of us cut back on traditional and indulgent festive classics. Sales of Christmas puddings were down by 16%, while seasonal biscuits were 11% lower. Turkey sales also fell by 1%, partly down to a shift from whole birds to smaller and cheaper joints such as crowns.

“Shoppers also popped fewer corks this year, as sparkling wine sales dipped by 8%. However, both beer, up 1%, and still wine, up 2%, were more popular than in 2018. As predicted, Monday 23 December was easily the single busiest shopping day of 2019 – and indeed the largest shopping day ever recorded – worth £798 million as the nation stocked up before Christmas Eve.”

Overall, average household spending over the 12 weeks fell by £8 to £1,055, while total volume sales fell by 0.7%. Meanwhile, like-for-like prices only rose by a fractional 0.9%, which Kantar said was good news for consumers looking to control festive bills, but the low level of inflation did little to boost the market.

Meanwhile, Nielsen said grocery sales were up a meagre 0.5% in the past four weeks. They reached their peak at £6.2bn over the two weeks to 28th December, but this was a 0.2% value decrease in comparison to the same two week period in 2018.

Nielsen attributed this slump to several factors including increased competition, price cuts and lower inflation. Nielsen’s data also reveals that whilst consumers visited supermarkets more often over the Christmas period, shoppers were purchasing fewer items and spending less each time.

Over the 12 weeks to 28 December, the discounters Aldi and Lidl continued to outperform the major supermarkets. Sainsbury’s was the most successful out of the ‘Big Four’, despite a fall in sales of -0.4%. Meanwhile, there was a good performance from Co-op (+3%) and Iceland (+1.9%).

The best performing categories over the festive period included soft drinks which grew by 2.4%, while confectionery performed well growing by 2.2%, with chocolate ahead by 2.5%.

Mike Watkins, Nielsen’s UK Head of Retailer and Business Insight, said: “It is unsurprising that sales have remained relatively low over the December period, given that momentum continued to slow in the run up to Christmas this year. This has given us the lowest Christmas sales growth since 2014, with shoppers choosing to visit stores more frequently, but spending less.”

“Despite the festive season, consumers are evidently remaining cautious by taking advantage of greater price competition and special offers. It’s possible that shoppers have also turned to healthier options as sales of no and low alcohol beer, cider and lager increasing by 24% in the last four weeks, whilst total category sales in beer, wine and spirits have declined slightly by -0.1%. However, consumers have opted to indulge through other means - which helps to explain the uplift in sales for confectionery and soft drinks over the festive period.”

Elsewhere this morning, agriculture and engineering group Carr’s (CARR) has issued a trading update ahead of its Annual General Meeting being held this morning.

This update relates to the 18-week period ended 4 January 2020, with the board stating that performance of the group has been in line with existing expectations for the full year.

However, trading in Agriculture during the last three months was behind the board’s expectations driven primarily by mild weather.

In the UK, lower cattle prices, downward pressure on milk prices and rising input costs have contributed to pressure on farm incomes which, combined with continuing Brexit uncertainty, has resulted in reduced levels of farmer confidence.

In addition, following the unseasonably mild and dry weather seen over the prior year supporting large forage stocks on farms, the division has seen reduced spending on feed and animal supplements. This has resulted in reduced sales volumes in both UK Agriculture and UK Supplements to the end of the period despite an initial good start to the financial year.

Full year performance in agriculture is expected to be moderately behind the Board’s previous expectations.

To mitigate this, full year performance in Engineering is now expected to be slightly ahead of the board’s previous expectations.

CEO Tim Davies commented: “Despite a challenging start to the year in our Agriculture division, due to a number of weather and market factors, we are confident in the medium-term prospects for Agriculture.

“These near-term challenges in Agriculture are expected to be offset by a stronger than expected performance in our Engineering business, where the order books remain strong, in addition to lower central costs. Our investments in people, acquisitions and research, alongside our expanding international footprint, leave us well positioned for sustained growth.”

On the markets this morning, the FTSE 100 is up 0.1% to 7,581.2pts so far.

Risers include Marks & Spencer (MKS), up 4.6% to 222.9p, Sainsbury’s (SBRY), up 2.2% to 231.6p and Imperial Brands (IMB), up 2% to 1.948.2p.

Fallers so far this morning include McColl’s (MCLS), down 2.3% to 38p, Premier Foods (PFD), down 1.3% to 37.5p and Greencore (GNC), down 0.8% to 258.8p.

Yesterday in the City

The FTSE 100 fell by a further 0.6% to 7,575.3pts on intensifying concerns about the situation in Iran and a spike in oil prices.

Morrisons was down 3.3% to 192.5p ahead of this morning’s trading update, which was widely expected to show a significant drop in sales.

Also falling were Nichols (NICL), down 3.2% to 1,440p, Bakkavor, down 2.4% to 140.2p, Cranswick (CWK), down 2.4% to 3,382p, Hilton Food Group (HFG), down 2.3% to 1,092p and Marston’s (MARS), down 2% to 125.7p.

Compass Group (CPG), which announced the departure of its chairman Paul Walsh yesterday, fell 1.6% to 1,859p.

The day’s few risers included Hotel Chocolat (HOTC), up 4.2% to 495p, McBride (MCB), up 3.1% to 86p, Eagle Eye Solutions, up 2.2% to 231p and Glanbia (GLB), up 1.5% to €10.36.