It's been a busy week for the FTSE with a string of trading updates from the UK's biggest retailers. Here's a quick summary of the main announcements.



Morrisons beat its Christmas sales expectations with yet another standout set of numbers as the company enjoys a hugely successful turnaround under CEO Dave Potts. In November the company reported its fourth straight quarter of sales growth and looks on track to make that five in a row.

Against a challenging backdrop the company delivered a 2.9% rise in like-for-like sales (excluding fuel) in the nine weeks to January 1. LFL transaction growth raced along at a very healthy 5.2%. All this translates into full-year profits likely to be ahead of consensus, at something like £330m-£340m.

There are clearly headwinds for the sector in the shape of a weak pound driving up costs just as grocers are involved in a tough price war. Rising prices for the supermarkets could squeeze margins even more and in-store deflation could get worse, although Morrisons seems well placed to weather that as it sources more from the UK than its chief rivals.

Like rivals Morrisons is suffering from declining basket sizes, which on average fell more than 5%. The trading statement omitted a deflation figure we know that in-store deflation ran at 1% in the third quarter, so it’s likely to be somewhere around that number, perhaps a little less.

The going could get a bit tougher for Morrisons in 2017 as year-on-year comparisons are going to be measured against 2016’s solid performance. With 2015 the low watermark for the company, posting year-on-year growth was probably easier in 2016 than it will be in 2017.

Nevertheless the turnaround since Potts took over in March 2015 has been very impressive, and is still in its infancy. It is continuing to deliver strong cash generation, making it easier to pare down debt quicker than expected. In September it reported that free cash was up 16% and it is on track to exceed its own cost savings target of £1bn next year. A £2bn free cash target was achieved six months ahead of schedule.


 Sainsbury’s also delivered a better-than-expected Christmas trading update. Shares in the group climbed above where they were before the EU referendum in June as UK consumers continue to spend big despite Brexit uncertainty

It was a minor beat for Sainsbury’s but with like-for-like sales up a measly 0.1% in the 15 weeks to January 7th, it was not exactly a standout quarter. It was however a clear improvement from the 1.1% drop in the second quarter. There are signs of a pick-up after a pretty challenging 6 months – LFL sales were down 0.8% in the first quarter too.

Sainsbury’s results are positive but have to be viewed in the wider context of the market, which seems to have enjoyed a bumper Christmas. According to Kantar, supermarket sales were up 1.8% in the 12 weeks to January 1st – while not a direct comparison with Sainsbury’s results, it does reflect perhaps a slight underperformance by the company.

Sainsbury’s is losing market share, notably to Tesco, as the latter is enjoying a rebound. Sainsbury’s did very well when Tesco and others were struggling but is now facing its own challenges. And all the sector-wide problems like falling margins and the sterling squeeze from suppliers are there, too. 

The real positive comes from Argos, which delivered a show-stopping 4.1% leap in like-for-like sales, confirming just what an important strategic acquisition this was for the supermarket.

We have to now view Sainsbury’s as a wider business post Argos acquisition and looking ahead we expect some not insignificant cost synergies (particularly around real estate) and growth as a result of store integration.


Tesco continued its turnaround process with an impressive 1.5% rise in group like-for-like sales, led by a 1.8% gain for the core UK business. Of note and showing just how much Dave Lewis has achieved, the period marked the supermarket’s first quarterly market share gain since 2011. Very impressive for the UK’s leading grocer and a fitting way to cap its eighth quarter of LFL volume growth.

Sterling is, of course, a factor and Tesco says it is working “in collaboration” with suppliers to manage the situation, which is shorthand for telling Unilever it wouldn’t pay 10% more for the latter’s goods. Flexing its muscles as a buyer seems to have paid off for now but we have to factor in the prospect that higher costs will eat into margins.

Investors were not overly impressed, however, with the stock down 2.5% on the open. Optimism from Sainsbury’s and Morrisons good results earlier this week had fuelled some buying but looks like Tesco failed to deliver anything extra on top. Encouraging results from the UK’s biggest retailer nonetheless.


Marks and Spencer delivered arguably an even more impressive set of figures as it seems shoppers are once again heading to the high street staple for their more than their undies. Clothing and home sales rose 3.1%, although 1.5% of that was down to a shift in the reporting period – which led to the inclusion of five extra days of the December sale. Food sales continue to impress and despite the improved clothing numbers we are still seeing M&S effectively pivot from being a clothes retailer that does food to a high-end grocer that also does clothes.

There was only ever one way for M&S to go. Christmas 2015 saw a 5.8% drop in clothing and home sales. M&S was coming from a low base but nevertheless these are encouraging numbers. The quarterly earnings from M&S in November were also very poor as profits sank 90% to £25m. So these were good results and perhaps signs that Steve Rowe’s ambitious turnaround strategy is finally yielding fruit. A long way to go yet for M&S, but this is a good report.

Associated British Foods

Associated British Foods enjoyed a bump from the weak pound, particularly in its sugar business. AB Sugar revenues were up 22% on a constant currency basis but 38% at actual exchange rates.

But it’s the incredibly impressive Primark sales that catch the eye. Sales at the budget clothing retailer were up 11% - again the weak pound helped with these rising 22% when measured at actual exchange rates.

JD Sports

Sports fashion store JD Sports delivered impressive numbers too, with the retailer enjoying a 10% rise in sales across all its brands.


Debenhams also posted a decent Christmas trading period, notably a 13.9% rise in online which means its internet business has enjoyed a very strong 25% increase over the last two years.


For the 26 weeks ended October 29 2016, retail revenues were up 25% and like-for-like sales up 12.8%. Again online was of note – “online participation” in sales climbed to more than a fifth. For Christmas, revenues were up 20% on LFL sales growth of about 15%.

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