On Wednesday, Morrisons, a supermarket chain, is anticipated to ring up an increase in annual profits as its wholesale arm is helping it weather the effect of a tougher consumer backdrop.
Morrisons is the fourth biggest supermarket in the United Kingdom. It is set to announce a 9 percent increase in underlying pre-tax profits to £407 million, an increase from the £374 million that was recorded the previous year.
The supermarket’s results will be closely watched for the final fourth-quarter sales out-turn after it reported slowing growth in retail sales for the first nine weeks covering the all-important Christmas season.
Its like-for-like retail sales sharply slowed to 0.6 percent, down from the 1.3 percent in the last three months.
However, overall, the like-for-like sales increased by 3.6 percent thanks to a 3 percent contribution from the wholesale division, which includes tie-ups with Amazon and McColl’s.
Some retail experts at Barclays believe that the comparable sales will continue to increase to 3.6 percent in the fourth quarter as a whole, with retail sales growth edging up to 0.8 perent and wholesale nudging lower to 2.8 percent.
They expect that the fillip from the wholesale side will continue to ease back, with the growth in sales from the operation peaking at 4.3 percent in the third quarter.
The results come as the £12 billion mega-merger between rivals Asda and Sainsbury’s has been left on the brink of collapse after the competition watchdog said that it could block the deal unless they decide to sell off significant stores or even one of the brands.
As well as sending the shares in Sainsbury’s, an FTSE 100-listed company, falling, it also knocked Morrisons as its investors fretted over the outlook for consolidation in the grocery sector and the possibility for rivals to snap up offloaded stores.
The Share Centre stated: “As ever, recent sales numbers at its core retail business will be important.”
It added: “Competition concerns are not going to go away and management initiatives will take time to execute; there is also fading hopes of the group picking up stores from the Sainsbury/Asda proposed merger.”
The bosses of Morrisons are likely to be questioned on the general consumer outlook, amid the mounting signs that retail spending is beginning to show the strain of Brexit uncertainty.
However, the latest industry data from Kantar Worldpanel revealed that grocery volumes are growing by a stable 1.2 percent in the four weeks to the 24th of February.
Kantar also said that a survey suggested that one in 10 shoppers claim to have begun stockpiling food in order to prepare for a no-deal Brexit, even though it added that this has not yet been borne out in the till roll data.
The figures revealed that Morrisons saw its market share decline to 10.5 percent from 10.6 percent a year ago, even though it estimated a sales growth of 0.8 percent in the 12 weeks to the 24th of February.
Last January, Morrisons joined its peers by lowering the prices of 935 products by an average of 20 percent in an attempt to attract budget-conscious post-Christmas shoppers.
Tesco also introduced a range of deals to celebrate its centenary year, cutting prices on household staples, as the sector continues to face intense competition from discounters Lidl and Aldi.