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Morrisons expected to post further sales growth

Published 28/10/2016

Morrisons' results will be scanned for signs that the weakening pound is starting to impact the grocer's costs
Morrisons' results will be scanned for signs that the weakening pound is starting to impact the grocer's costs

Morrisons is expected to notch up a fourth consecutive quarter of like-for-like sales growth when the supermarket releases its latest results next Thursday.

Analysts at HSBC are forecasting a 1.5% rise in like-for-like sales in the third quarter, driven by improved grocery offerings.

That number is lower than the 2% growth bagged in the second quarter, but would still mark four straight quarters of positive growth.

It comes amid a turnaround plan under chief executive David Potts, who took the helm last year following the removal of former boss Dalton Philips.

Mr Potts went on to ink a new deal with Ocado and sign a landmark agreement with online giant Amazon to supply fresh food to customers earlier this year.

HSBC analyst David McCarthy applauded management for strengthening the balance sheet, which he said will help protect the grocer as price competition and costs - related to the weaker pound and national living wage - start to rise.

However, he said the company still remains in a weak strategic position amid its sector peers.

He said: "Aldi's (market) share is now 7.4% versus less than 10% for Morrisons.

"Given Aldi offers just over 2,000 lines and Morrison around 10 times that amount, and given Aldi is typically lower priced, this suggests Aldi's buying power per line is substantially higher than Morrison's on average.

"Aldi has halved the gap in market share with Morrison in under two years. In the same period, Tesco has lengthened its lead."

All of the so-called big four supermarkets - Tesco, Asda, Sainsbury's and Morrisons - have been cutting prices in a bid to better compete with German upstarts Aldi and Lidl, who have eroded their market share.

In August, Morrisons revealed it was slashing selected meat and poultry prices by 12%.

The supermarket's results will also be scanned for signs that the weakening pound is starting to impact the grocer's costs, as import prices rise.

Earlier this month, Tesco and Unilever were involved in a high-profile stand-off over a potential 10% price hike on products including Marmite and Persil, linked to the collapse in sterling.

Unilever later said the dispute had been resolved, but warned that consumers would still have to stomach more pain.

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