Morrisons delivered further sales growth during its third quarter to 28th July as moves to improve product availability and enhance the appeal of its More Card offer helped it win back shoppers.
Total sales (ex-fuel) were up 2.1% to £3.9bn, while a like-for-like increase of 2.9% was primarily volume driven. The LFL figure was down on the 4.1% gain in the previous quarter, although inflation has tailed off significantly since then, with Morrisons ramping up its efforts to improve its competitiveness.
Morrisons noted that it saw a strong performance from its Nutmeg clothing brand, with like-for-like sales up 8%. Meanwhile, Back to School sales surged 23%.
The group revealed that product availability had improved by 2% points year-on-year, aided by AI-powered availability cameras in over 400 of its stores. The cameras monitor on-shelf stock levels, automatically reordering when necessary and alerting staff in real-time to gaps.
Morrisons’ efforts to combat the discounters included adding a further 50 products to its Aldi and Lidl Price Match scheme, bringing the total to almost 300. Meanwhile, investment in its loyalty programme has included the recent launch of over 2,000 More Card prices. Morrisons also confirmed today that it will start introducing the More Card into its convenience stores in October.
CEO Rami Baitiéh has been implementing his recovery plan since joining the business 12 months ago. He stated today that its switching data had improved year-on-year and that although the market was noticeably softer in the last quarter, Morrisons’ relative position had improved and market share stabilised.
“As inflation reduces, we are seeing customers increasingly valuing Britishness, provenance, quality and the love of great value fresh food, all of which is in Morrisons heartland,” Baitiéh said.
“Our price competitiveness improved further in the quarter as our Aldi and Lidl price match, More Card offers, and everyday low prices combined to give customers increasing confidence in Morrisons great value.”
Meanwhile, following earlier press reports, Morrisons confirmed that it had struck a multi-million-pound property deal with a real estate investor as part of its efforts to reduce its large debt pile.
The retailer has agreed a ground rent transaction on 76 of its supermarkets that will generate proceeds of £331m. Morrisons noted that the properties will remain under its control, and its retail estate portfolio remains over 80% freehold.
The deal is expected to be completed early next month and will see the investor pay the sum for the right to receive an income stream from the stores for the next 45 years. Morrisons did not reveal the name of the investor, although an earlier report by Sky News claimed the deal is with real estate firm Song Capital.
The transaction follows the disposal of its forecourt business at the start of the quarter. Morrisons stated that if the proceeds from the latest transaction are also used to reduce debt, on a pro-forma basis, its debt would be £3.6bn, down 41% from its peak.
CFO Jo Goff said the business was now expecting increased EBITDA for the full year and further operational progress, while Baitiéh concluded: “We are just getting started, but the teamwork and positivity has been exceptional across the business, and I want to say thank you to everyone for the part they are playing in the reinvigoration of Morrisons.”
NAM Implications:
- The need to improve availability in grocery is a no-brainer.
- The loyalty card promo costs Morrisons but is key in maintaining competitiveness.
- The addition of 50 SKUs to its Aldi & Lidl price matching scheme i.e. now 300 SKUs…
- …is significant, bearing in mind that the total SKU count in the discounters is around 2,000.
- Finally, the Ground rent deal yielding £331m will help a little…
