Sales keep Morrisons in FTSE 100
British supermarket Morrisons has been saved at the last minute from being kicked out of London’s blue chip index after its first rise in sales for nearly 18 months sent shares surging.
FTSE Russell confirmed Morrisons will remain in the FTSE 100 Index, narrowly avoiding an embarrassing relegation to the FTSE 250, which would have ended more than 14 years in the top flight.
The Bradford-based chain has enjoyed a share rally since industry figures from Kantar Worldpanel yesterday revealed that sales edged 0.1% higher in the 12 weeks to May 24 – the grocer’s first rise since December 2013 and the only sales growth among the Big Four supermarkets.
It had been on track to be kicked out of the FTSE 100 after a tumultuous time for the group saw its share price tumble.
But the stock’s rebound came just in time for the FTSE’s quarterly shake-up, which was based on last night’s closing prices
Shares in the group rose 2% higher yesterday. The rise lifted Morrisons’ market value to more than £4 billion, above mobile power company Aggreko.
Aggreko will instead leave the top flight now, with satellite company Inmarsat replacing it in the top flight.
The modest sales growth at Morrisons was well-timed for the group, coming not only just ahead of the FTSE reshuffle, but also just days before the supermarket’s annual general meeting on Thursday.
It will provide a welcome boost to the supermarket’s new boss David Potts as he prepares to face shareholders at the event in Bradford.
Experts said the sales figures suggested the turnaround at Morrisons was beginning to gain traction and shares closed up more than 3% again today.
Shares were also 2% higher for listed rival Sainsbury’s and 1% for Tesco as the Kantar figures signalled a narrowing in deflation, which has been putting the squeeze on grocery profits.
The data revealed food deflation stood at 1.9% in the three months to May 24 - a reversal of the previous trend, which had seen the rate deepen to 2.1%.
Analysts at Bernstein said the narrowing in deflation was reversing the “longstanding decline since November 2011” and showed the first signs of inflation turning the corner.
Shore Capital’s Clive Black said: “Grocery stocks are through the worst of their travails as structural change takes place.”
But yesterday’s market share data made painful reading for the major players.
Morrisons held its market share at 10.9%, while its main rivals Tesco and Asda suffered falls as they continued to come under pressure from discounters Aldi and Lidl.
Tesco’s market share dropped to 28.6% in the 12 weeks, down from 29% a year earlier, as sales fell 1.3% while Asda saw its share fall to 16.6% from 17.1% after a 2.4% sales slide.
Sainsbury’s maintained its share at 16.5% despite a 0.3% fall in sales, according to Kantar.
With Morrisons the only one of the top four to enjoy an increase, Kantar said its fightback was gathering pace.
Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said: “A committed core of loyal Morrisons consumers is responding positively to recent initiatives and business has been boosted by online sales.”
But he added: “Morrisons’ performance is an improvement on what was a difficult May 2014, so this is only the first step in any future recovery.”
Mr Potts took the helm in March, replacing Dalton Philips, who was ousted in January after sliding profits and sales.
Thursday’s annual meeting will be watched with keen interest after last year’s AGM saw Mr Philips submitted to a humiliating dressing-down in front of shareholders by former chairman Sir Ken Morrison.
Sir Ken described Mr Philips’s strategy as “bullshit”, as the then-boss faced intense pressure amid sliding sales and a fierce supermarket price war.
It is expected that Sir Ken will be in attendance at this year’s Bradford-based meeting, with other family members, who are thought likely to vent their anger at the £2.1 million paid to Mr Philips last year, plus a £1.1 million pay-off.
