Torn flags fly in the wind outside a Morrisons supermarket in Liverpool, northern England March 12, 2015.
The supermarket reported its first positive sales growth in 4 years, with a 0.2% improvement beating City forecasts of a 2% decline.
But profit for the year is set to be worse than last year, when it plummeted 52% for the supermarkets worst performance in 8 years.
Still, the key takeaway from Morrisons' festive trading update, released on Tuesday, is that while things may still be tough, there is some improvement.
Here are the key numbers from the update, covering the 9 weeks to January 4:
- Like-for-like sales (only counting sales from stores that were open this time last year) up 0.2%, or down 0.6% excluding fuel;
- Like-for-like transactions down 1.6%;
- Like-for-like items per basket down 1.1%;
- Online sales up 100% on last year, although from a small base - it contributed just 0.9% to sales growth;
- Deflation, excluding fuel, of 3.7% due to aggressive price cuts;
- 800 head office jobs cut;
- 7 further stores slated for closure;
- Year-end net debt target cut from £1.9 billion-£2.1 billion to £1.65 billion-£1.8 billion;
- Restructuring costs for the year forecast at £60 million;
- Pre-tax profit forecast for the year of £295 million-£310 million, down from £345 million last year;
The overall picture is that Morrisons may have finally found the bottom for declining sales, reversing the trend by slashing prices and closing underperforming stores. Morrisons recently sold off its struggling convenience store business M Local and is cutting staff.
The 0.2% improvement in sales over Christmas compares to a 2.4% drop in the second quarter and a 2.6% fall in the third quarter - so it looks like things are improving. The sales performance also beat City forecasts.
Analysts at Jefferies say this morning that the results "suggest we are at a turn" and say "the group appears in great shape to deliver from here."
Potts says:
We are pleased with our improved trading performance over the Christmas period. While there is of course much more to do, we are making important progress in improving all aspects of the shopping trip, and our customers tell us they are pleased with the changes. In addition, we have made further progress in debt reduction, and our financial position is strong and getting stronger.
I would like to thank our colleagues for their very hard work and dedication, both in serving customers so well over the busy Christmas period and then again in helping their communities, especially in the north of Britain where the flooding has been so severe.