Grocers Set For Solid Christmas Sales Figures Despite Snow

Robust results from Wm. Morrison Supermarkets PLC (MRW.LN) and Ocado Group PLC (OCDO.LN), the first of the store-based and online supermarkets to report Christmas sales, reflect realistic market expectations for solid grocery sales despite the disruptive weather.

Morrison kicked off the supermarket festive sales updates with a 1% rise in sales in the six weeks to Jan. 2, on a same-store basis excluding Value Added Tax and fuel.

The growth comes despite two separate weeks of severe weather in December which has already prompted several profit warnings from general and clothing retailers, but which had less of an effect on supermarkets, which sell essential and perishable food.

Still, it is a slowdown from the 6.5% growth seen during Christmas last year, when Morrison was leading the supermarket pack, growing market share and outperforming its peers, all of which enjoyed a boost from rising food prices.

Supermarket sales growth across the sector has slowed substantially throughout 2010 as lower inflation put the brakes on rising prices which had helped boost sales in 2009.

Tesco PLC (TSCO.LN) and J Sainsbury PLC (SBRY.LN) will report Christmas sales on Wednesday and Thursday this week and are expected to report similar levels of growth albeit skewed by slightly different reporting periods and formats.

Consensus estimates are for Sainsbury to report a 3% rise in same-store sales, but this includes VAT and covers a 14-week period. Jefferies analysts forecast same-store sales at Tesco for the six weeks to Jan. 8 to rise 1.1% excluding VAT and fuel.

Online grocer Ocado PLC (OCDO.LN) also reported a strong Christmas trend, with sales up 30% in the weeks when the snow didn't affect delivery, and up 26.7% over the four weeks to Dec. 26.

Ocado's growth is due in large part to the growth of online shopping, which so far has seen around 2% of the GBP150 billion grocery market shift to ordering online. The pace of this shift will dictate the pace of Ocado's growth and analysts are forecasting sales growth of around 25% in fiscal 2011.

December marks the start of Ocado's fiscal year, and it reported sales up 29% to GBP551 million in the 52 weeks to Nov. 28. Ocado has yet to turn a profit in the 10 years since its launch although most market watchers expect it to do so in fiscal 2011.

Chief Financial Officer Andrew Bracey told Dow Jones Newswires the company expects full year earnings before interest, taxes, depreciation and amortisation, or Ebitda, to be in line with expectations of between GBP21 million and GBP21.5 million for fiscal 2010.

He added that some analysts believe this could signal profitability even earlier than forecast. Ocado reports full year results on Feb. 1.

He shrugged off concerns that the company's long-term partner - upmarket grocer Waitrose - will this month start increasing the scope of its own delivery service within the key London area, commenting that "there are more than enough customers for all of us."

His comments reiterate Ocado's premise that the online grocery market will continue to grow strongly as more customers choose to shop on the web, predicating the company's growth plans.

Snow had a more marked effect on Debenhams PLC (DEB.LN) the department-store chain, which reported same-store sales excluding VAT down 1.3% in the 19 weeks to Jan. 8.

The company said the severe weather sliced off between 2.5% and 3% of sales as customers struggled to reach the group's 167 stores and online Christmas posting dates were brought forward over fears the weather would affect deliveries.

At 1122 GMT, Ocado shares were down 2% or 4 pence at 182 pence, Morrison shares were flat at 270 pence and Debenhams shares were down 1.6% at 73 pence in a slightly lower London market.

By Kathy Gordon, Dow Jones Newswires; 44-207-842-9293; kathy.gordon@dowjones.com

Debenhams (LSE:DEB)
Graphique Historique de l'Action
De Juin 2024 à Juil 2024