TIDMMRW
RNS Number : 5203K
Morrison(Wm.)Supermarkets PLC
05 January 2021
News Release
Release date: 5 January 2021
Sustaining strong momentum: 9.3% Group LFL over Christmas and
New Year
Throughout recent weeks we have remained focussed on playing our
full part in feeding the nation amidst the ongoing extremely
difficult period for all. Sales have continued to be strong,
particularly over the key Christmas and New Year period when Group
like-for-like(*) (LFL) ex-fuel sales improved to 9.3%. Our amazing
colleagues have continued to rise to the unprecedented challenges
and have been key in further driving the momentum of the business.
Underlying performance was again very strong throughout the whole
period, with significant operational gearing offsetting both the
extra COVID-19 costs and other profit impacts that have increased
further since the introduction of the most recent tier systems in
early December. All customer and brand metrics have improved,
market share has grown, and our online and wholesale channels are
growing very rapidly as we develop as a multi-channel business. We
look forward to sustaining this strong momentum into the new
year.
For the first 22 weeks of H2 to 3 January, Group LFL sales
ex-fuel were up 8.1%, comprising contributions from retail of 7.2%
and wholesale of 0.9%. Group LFL inc-fuel was up 1.9%, with fuel
LFL down 23.1% again temporarily impacted by the various new
lockdowns and tier restrictions implemented during H2. Total
sales(*) were up 8.7% ex-fuel (up 2.3% inc-fuel), with a 0.6% net
new space contribution. Three further new stores were opened during
the period, at Helensburgh, Glenfield and Dalton Park, bringing the
total to six this year. We again invested in cutting prices for
customers, with deflation a continuing feature for the whole period
and volume growth exceeding sales growth.
Breaking down our retail performance during the period, for Q3
(3 August to 1 November) LFL ex-fuel was 7.1%. Sales then briefly
increased further at the start of the second England lockdown,
before broadly resuming earlier growth levels and culminating in a
strong Christmas and New Year. For the nine weeks of Q4 to date,
retail LFL exc-fuel was 7.3%, and the December three weeks over
Christmas and New Year improved to 8.0%.
Shopping patterns and customer behaviour were different this
year as the COVID-19 restrictions made larger gatherings of family
and friends more difficult. In the lead-up to Christmas we saw more
customers shopping earlier than in previous years and a renewed
focus on traditional Christmas fare. Champagne sales were up 64%
compared to last year, whole salmon up 40% and Free From mince pies
up 14%. Our new doorstep delivery service completed over 35,000
orders in the two weeks before Christmas, delivering to the
vulnerable, the elderly, the isolating and the isolated to make
sure no-one was left behind. The feedback from these customers,
their families and communities for this service has been
amazing.
Online was again very strong as we continued to adapt well to
the sustained increase in customer demand, with sales more than
tripling so far in Q4 across all our channels year-on-year. Sales
growth continued to accelerate at both Morrisons.com and 'Morrisons
on Amazon', the same-day delivery service recently newly available
on Amazon.co.uk. Store pick home delivery, click & collect, our
relationship with Deliveroo, food boxes and our doorstep delivery
service are all new for Morrisons. We are still learning and
growing online, but it is already profitable and we expect it to
become more so as we continue to develop our offers for
customers.
Wholesale is also profitable and sales growth was strong
throughout the period, stepping up further at the start of Q4 as
the remaining McColl's stores not so far covered by Morrisons
wholesale supply began to transfer over to us. During the period we
started to supply 130, with another c.100 more to come by March
2021. Together with growth in our other wholesale channels,
wholesale LFL is 24.4% so far in Q4, contributing 1.2% to Group
LFL. In addition, McColl's has recently reported that it is
experiencing significant LFL sales growth at the 31 Morrisons Daily
conversions and is reviewing the opportunity to convert further
stores in the first half of 2021.
David Potts, Chief Executive, said:
"The pandemic has had a severe effect on people and communities
around Britain for nine months now but it has been especially hard
at Christmas time. I'm very pleased with the way the Morrisons team
has helped our customers across the nation enjoy their Christmas in
the best way they could - with safe shopping, great service and
outstanding stores even in the most difficult circumstances. But
I'm even more proud of the broader contribution that the Morrisons
team has made to the communities we serve - through foodbank
donations, doorstep deliveries to the vulnerable, discounts for key
workers, the work of our 500 community champions and the countless
small acts of kindness that have made a particular difference this
year.
"We will carry on listening, responding and growing, and take
all the positive learnings and momentum of the most challenging of
years into what we believe will be a better 2021 for all.
"I would like once again to thank everyone at Morrisons for
their hard work, dedication and resourcefulness under the most
testing and extreme conditions, which has been inspirational even
beyond this business and the stakeholders we serve."
Outlook
While the extremely unpredictable current circumstances, and the
consequences for both consumer behaviour and our COVID-19 costs,
make precise guidance difficult, we still expect 2020/21 profit
before tax and exceptionals to be in line with our expectations, in
the range GBP420m - GBP440m ** prior to the rates payment of
GBP230m.
Since our last update in early December, the government has
introduced further new tier systems and other restrictions. As a
result, as well as the extra GBP40m direct COVID-19 costs we
announced in early December, we now expect to incur a further
c.GBP10m before year end to cover costs such as additional
colleague absence, meaning total direct COVID-19 costs of c.GBP280m
for 2020/21. In addition, the extra restrictions mean all our cafés
are again closed, and areas such as fuel and food-to-go are once
more affected, with a further profit impact before year end similar
to the extra COVID-19 costs we are announcing today. However, we
expect the sustained and significant operational gearing from the
strong sales growth to offset these extra COVID-19 costs and profit
impacts.
As recently guided, we expect year-end net debt to be around
GBP1.7bn pre-IFRS 16. Debt continues to be temporarily adversely
affected by: the impact on working capital of the ongoing lower
national demand for fuel and fuel deflation (currently c.GBP220m);
investment in higher levels of stock availability both during
COVID-19 and in our preparations for Brexit (c.GBP65m); and the
extension of the scheme to pay our smaller suppliers immediately
during the crisis (c.GBP60m). We expect the Brexit and smaller
suppliers impacts to reverse during Q1 2021/22, and fuel to reverse
as trading conditions normalise.
Reflecting our strong underlying cash flow and balance sheet,
and guided by our continued adherence to the principles of our
capital allocation framework, we recently announced a previously
deferred special dividend for H2 2019/20 of 4.00p per share, which
is to be paid on 25 January 2021 to those shareholders who were on
the register as at close of business on 18 December 2020.
Figure 1 - LFL sales performance (ex-VAT, reported in accordance
with IFRS 15)
2019/20 2020/21
22 wks 22 wks 9 wks 3 wks
to 5 to 3 to 3 to 3
Q3 Jan Q4 Q1 Q2 Q3 Jan Jan Jan
------- ------- ------- ------- ------ ---- ------- ------ ------
Retail contribution
to LFL (1.1)% (1.7)% (2.2)% 5.1% 11.1% 7.1 7.2% 7.3% 8.0%
------- ------- ------- ------- ------ ---- ------- ------ ------
Wholesale contribution
to LFL (0.1)% 0.0% 0.1% 0.6% 1.2% 0.7 0.9% 1.2% 1.3%
------- ------- ------- ------- ------ ---- ------- ------ ------
Group LFL ex-fuel (1.2)% (1.7)% (2.1)% 5.7% 12.3% 7.8 8.1% 8.5% 9.3%
------- ------- ------- ------- ------ ---- ------- ------ ------
Group LFL inc-fuel (2.5)% (2.8)% (2.4)% (3.9)% 2.1% 2.2 1.9% 1.5% 3.5%
------- ------- ------- ------- ------ ---- ------- ------ ------
* Reported ex-VAT and in accordance with IFRS 15
** Consensus profit before tax, exceptionals and rates payment
is GBP433m (Source: VUMA. Published on Investor section of
Morrisons website, 13 October 2020). As already announced, we will
pay rates of GBP230m for 2020/21 and GBP44m for February and March
2021.
Notes:
This announcement includes inside information.
-S -
Enquiries:
Wm Morrison Supermarkets plc
Andrew Kasoulis - Investor Relations
Director 07785 343515
Media Relations
Wm Morrison Supermarkets plc: Simon Rigby 07771 784446
Citigate Dewe Rogerson: Kevin Smith 07710 815924
There will be an analyst conference call at 8.30 a.m. today, the
details of which are as follows:
+44 (0) 20 3003
Dial-in number: 2666
Password: Morrisons
Replay facility available for 7 days:
+44 (0) 20 8196
Replay dial-in number: 1480
Access Pin: 9198339#
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