Royal wedding gives Morrison reason to cheer

Wm Morrison offered further evidence of an uptick in spending amid recent warm weather and the long royal wedding bank holiday weekend, but Britain’s fourth-biggest grocer by market share warned that consumers could start to rein in their purchases once more.

Aggressive promotions and an advertising campaign fronted by Andrew Flintoff, the former England cricketer, also helped Morrison increase sales from stores open at least a year, excluding fuel, value added tax and vouchers, by 2.5 per cent.

The rise was much better than the 1.5 to 2 per cent that analysts had expected.

Morrison said its price cuts on 5,000 lines in January, and its “Fuel Britannia” and “Let’s Celebrate” advertising campaigns covering the Easter and the royal wedding period had tapped into the consumer psyche.

“Our guys did a fantastic job, judging the mood of the nation, which was [in] February and March, the customer was feeling very stretched, and household budgets were getting really squeezed, particularly from increased fuel prices and taxes,” said Dalton Philips, chief executive.

“The good weather hit, Easter, the royal wedding. And the consumer wanted to come out and recognise those events, and celebrate.”

However, the willingness of consumers to splash out was a “temporary event”, he said. “I don’t see any respite for the rest of this year.”

Mr Philips said Morrison’s “Let’s Celebrate” campaign had resulted in increased sales of champagne and barbecue items such as burgers and steaks, as well as picnic products.

Sales of bin bags were up 30 per cent, while cupcakes and flags did well, and 150 miles of bunting was sold.

Richard Pennycook, finance director, said Morrison could potentially look at some Focus DIY stores, after the DIY chain went into administration this week. He refused to comment on Iceland Foods, which is expected to come up for sale, but said the group would look at opportunities for growth.

● FT Comment

Morrison has regained momentum after a slowdown late last year. While it remains cautious for the full year, it has a tailwind from the self-help measures being put in place by Mr Philips, such as productivity improvements and freeing space in its stores, things its bigger rivals have already done. Shore Capital forecasts full-year pre-tax profit of £925m. The shares, which rose 3p to 303.3p, trade on a forward price/earnings ratio of 12. The discount to J Sainsbury, whose most recent sales figures were disappointing, and which reports on 13, looks harsh.