Morrisons had a respectable start to the financial year after total sales increased by 2.4% in the first quarter. Stripping out fuel, sales jumped by 2.9%. On a like-for-like basis, retail sales increased by 0.2%, while the wholesale sector outperformed, as revenue increased by 2.1%. At the time of writing, the Morrisons share price was hovering around 188p.

The strong wholesale figure vindicates the decision to merge with McColls. The supermarket sector is changing, and diversification is crucial to keeping up with the rest of the sector. The group said it expects the market to "remain competitive and challenging".

Morrisons share price boosted by special dividend

In March, the company posted solid full-year numbers as profit jumped by 9%. A final dividend of 4.75p was declared, and a special dividend of 4p was also unveiled. Morrisons has certainly been a victim of the supermarket price war, and back in 2015 revealed its lowest profit in eight years. But David Potts took over the running of the group that same year, and the bounce back from the retailer is a testimony to his performance. The fact the group was in a position to pay a special dividend underlines the strength of the business.

Morrisons market share slides        

According to Kantar, in the three months until mid-August, Morrisons lost 2.7% of its market share. The group was the worst performer of the ‘big four’. Tesco, Sainsbury’s and Asda lost 1 6%, 0.6%, 1.5% respectively. It’s the same old story, with the deep discounters snapping up market share, and Lidl and Aldi saw their market shares increase by 7.7% and 6.2% respectively. Ocado performed well too, as consumer habits are changing and online shopping is becoming more popular.

In June, Morrisons said it is expanding its same-day delivery service with Amazon, and it will now include Newcastle, Glasgow, Liverpool, Sheffield and Portsmouth. The group is on the back foot on account of the discount stores and Ocado, and the tie-up with Amazon is aimed at helping the group keep up with current trends. Investors will be hoping these actions have a positive impact on the Morrisons share price.

Rivals restructure amid discounters threat

Recently we saw that Tesco sold off its mortgage book to Lloyds in deal that was worth £3.8 billion, in a move was aimed at freeing up capital, and getting back to basics for both groups. Tesco is bound to use the freed up cash to focus on its core business, and the initiative is part of a wider restructuring programme. Marks and Spencer is also undergoing a restructuring scheme in a bid to become more efficient. The programme involves closing stores and it also has a tie-up with Ocado, as M&S sees the benefit of the online space.

The failed merger between Sainsbury’s and Asda has prompted Walmart, Asda’s owner, to consider an IPO for the UK supermarket group and should that take place, it would probably bring about even tougher competition within the sector as the newly-listed firm would be at the mercy of the stockmarket.


Disclaimer: To stop receiving market commentary emails from David Madden, please reply to this email with ‘Unsubscribe’ in the subject line. CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.