Morrisons' sales accelerate as Amazon deal pays off

pulse

May 16, 2017 8:34 AM

Sales grew by 3.4% in the first quarter of 2017.

Morrisons Chief Executive David Potts.

LONDON — Morrisons' sales jumped by 3.4% in the first quarter of the year, the supermarket said on Thursday.

Sales at stores that have been open for at least a year were up 3.4%. Sales including fuel were up a huge 6.3%.

The results show strong momentum at Morrisons, which until recently was struggling to keep pace with discounters Aldi and Lidl and the move towards convenience stores. For comparison, Morrisons sales grew by 2.9% in the final quarter of 2016, enjoying its best Christmas in 7 years, and by just 0.7% in the same quarter last year.

CEO David Potts, who was parachuted in to turnaround the business two years ago, says in Thursday's update:

"Our new financial year has started well, thanks once again to the dedication of our team of food makers and shopkeepers. We are improving the shopping trip in many different ways, which is making Morrisons more popular and accessible for customers. These new initiatives in-store, online, in wholesale and services are beginning to build a broader, stronger Morrisons.

"We are confident we will continue to turnaround and grow Morrisons. Our expectations and guidance for 2017/18 are unchanged, including year-end net debt of less than £1bn."

Morrisons highlights the launch of new ranges, such as its healthy "Eat Smart" option, and new products, such as womenswear, for helping to drive the growth.

A push into online is also paying off for the supermarket. Morrisons launched an online flower deliver service that is doing well and says its new partnership with Amazon to deliver groceries "continues to grow, with the same-day and one-hour delivery service recently extended into more London postcodes."

Analysts at Jefferies say in a note on Thursday morning: "We would expect the Amazon wholesale agreement, the Safeway wholesale efforts, and the Rontec joint venture to contribute a steady level of like-for-like accretion in the quarters ahead."

Rival Sainsbury's warned on Wednesday in its full-year results that the market remains "challenging" and said "the picture is changing" for the UK economy. Morrisons says on Thursday: "There was some inflation during the period, as imported food prices were affected by lower sterling."

Jefferies says: "[Morrisons] remains better equipped than peers to face an unhelpfully uncertain UK outlook."

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