Morrisons may ‘refresh’ cash returns to shareholders

Bradford-based supermarket giant Morrisons on Tuesday gave a strong hint of cash returns to shareholders as it announced it intends to “refresh” its long-term capital allocation plans “within the context of our capital allocation framework, at the time of the interim results in September.”

The news came as Morrisons published a first-quarter trading statement for the 14 weeks to May 9, 2021, showing like-for-like (LFL) sales ex-fuel up 2.7% and total sales up 5.3% including fuel.

Morrisons said it expects profit before tax and exceptionals to be higher than the £431 million it would have achieved for 2020-21 “had we not waived the £230m business rates relief.”

The company said: “During the pandemic there has been a renaissance of the supermarket in Britain and customers are enjoying cooking at home more.

“Customers have also embraced shopping online, and both and Morrisons on Amazon are now complementing our supermarkets well.

“Online sales during Q1 continued to be very strong, with year-on-year growth of 113%.”

Morrisons CEO David Potts said: “We’ve had an encouraging start to the year, with positive like-for-like sales and some good momentum across Morrisons both on a one and two-year view.

“We said back in March that we expected to grow profits and reduce debt in the current year and I’m pleased to be both reiterating that guidance today and looking forward to a year of meaningful profit growth in 2022/23.

“The pandemic is not yet over, but it is in retreat across Britain and there is much to be positive about as something approaching normal life begins to take shape.

“Our forecourts are getting busier, we are seeing encouraging recent signs of a strong rebound of food-to-go, take-away counters and salad bars, and our popular cafés will soon fully reopen. 

“The nation has a summer of socialising and sport to look forward to and we’ll all be able to rediscover the joys of meeting up and eating well together. Whichever way consumers choose to enjoy their renewed freedom, we will be there for them.

“We’re looking to the future with confidence as we see the growing warmth and affection for Morrisons from our customers flow into every area of the business. 

“Our increasingly special butchers, bakers, fishmongers and other food makers are helping to brighten shopping trips, and the growing reach of our online businesses is attracting new customers and broadening the appeal of new Morrisons.” 

AJ Bell Investment Director Russ Mould said: “Supermarkets are now lapping very tough comparative figures. The nation rushed to stockpile food and drink during the latter part of first quarter 2020 and retailers are now reporting the same equivalent period for 2021.

“Under these circumstances, Morrisons’ 2.7% like-for-like sales growth excluding fuel isn’t too bad.

“Importantly, wholesale accounted a good chunk of that growth, with Morrisons continuing to strengthen its position as a key supplier to the likes of Amazon and McColl’s.

“Morrisons is now at the point where it needs to think about the next stage of its career, and we’ll find out its refreshed spending plans in September.

“This will almost certainly involve boosting capacity to fulfil online orders and seeing how it can further expand as a supply partner.

“Competition continues to be fierce in the industry and the latest push by many food sellers is for same-day, rapid speed deliveries.

“The economics of such a proposition are still being ironed out.

“To win in the supermarket industry, companies need to excel on multiple fronts, namely value for money, service and adapting to customer needs.

“Customers can be very demanding and supermarket bosses cannot afford to upset anyone as there is always another food and drink seller around the corner waiting to sell their goods.

“Morrisons doesn’t seem to be putting a foot wrong in terms of these factors, but equally there is nothing that really makes it stand out from the crowd.

“In the long term that could be to its detriment.”