Morrisons’ results for the six weeks to January 5th have been branded by Shore Capital analysts as “a surprise and a disastrous Christmas update”.
The supermarket revealed like-for-like sales were down by 5.6 per cent over the festive trading period. Total sales were down by 1.9 per cent excluding fuel and 3.3 per cent when it was added.
Shore Capital analysts Clive Black and Darren Shirley said: “Morrison has surprised us with an especially disappointing trading update today (January 9th)."
They noted that while the big four supermarkets all experienced weaker trading over Christmas, Morrisons’ suffered more because of its lack of online presence and its under-representation in convenience.
The analysts added that Morrison’s under-performance was due to fundamental issues with its brand. They believe that the supermarket’s fresh formats strategy had alienated core customers without attracting new ones.
They said: “The retailer has not recovered at a time when many customers have been tempted away to hard discounters and premium players in particular.”
Shore Capital has cut its profit forecast by 14 per cent, from about £800 million to £688 million, as it is assuming Morrisons will continue to experience weak sales in the first quarter of 2014. However, it offered hold advice on the supermarket’s stock.
Panmure Gordon analyst Graham Jones disagreed with Shore Capital and repeated a ‘sell’ advice on the retailer’s shares. He said: “Morrisons wasn’t due to report until January 20th but clearly felt that trading was too bad not to share.”
The chief executive officer of Morrisons, Dalton Phillips, agreed that his company’s results were discouraging, but he has high hopes for the future of the business.
He said: "We are firmly focused on driving our core business and accelerating our penetration of the fast growing channels.
“Our convenience business is building towards an operation of scale and the first food deliveries of Morrisons.com will be made tomorrow, reaching half of UK households by the end of the year.”
Mr Phillips added that although the sales environment continues to be challenging, the board expected full year underlying profit performance to be between £783 million and £853 million - which is towards the bottom of the range of current market expectations.