Morrisons and Waitrose take a bite of rivals’ market share

by Marcus Leroux - 22/07/2009

"One retailer is based in leafy Berkshire and is famed for selling swordfish steaks and crayfish sandwiches to Middle England. The other was built up from a few shops in Bradford into a multibillion-pound group by a plain-speaking Yorkshireman. "

But Waitrose and Wm Morrison — retailing’s odd couple — have become Britain’s fastest-growing supermarkets, both posting sales growth of more than 8 per cent despite catering for very different parts of the market.

Sales by Tesco, by contrast, grew by only 5.3 per cent in the 12 weeks to July 11. The figures were released yesterday as Morrisons surprised the City with a profit upgrade. The company said that the turnaround plan of Marc Bolland, its chief executive, had achieved better than expected sales improvements and cost reductions.

It said that an extra 500,000 shoppers were visiting its stores every week, boosting sales and improving profit margins. Sales of fresh food are more than 10 per cent higher than last year, Morrisons said.
The supermarket is desperate to improve its market share in Scotland and the South of England, where it is historically less well represented compared with its northern heartland. It has opened 14 convenience store formats to help it to penetrate prosperous urban areas. Morrisons hopes that an emphasis on its “market street” concept, which is based on fresh food, will help it to win share from Tesco, Sainsbury’s and the Co-op.

Andrew Wade, retail analyst for Numis, said that Morrisons’ performance was the first sign of an improvement in margins as a result of 18 months of like-for-like sales growth.
Sam Hart, at Charles Stanley, said: “We consider the valuation undemanding, given industry-leading sales momentum and superior forecast earnings growth. The group also has the strongest balance sheet in the sector and the highest proportion of freehold property.”

Analysts upgraded pre-tax profit forecasts to between £665 million and £740 million. The shares closed up 20¾p, or 8.2 per cent, at 274p.

Morrisons’ market share increased 0.4 percentage points to 11.6 per cent during the period, according to TNS Worldpanel figures. Fraser McKevitt, a TNS analyst, said that the 12 weeks to July 12 represented the 22nd consecutive period of market share growth.

Sales at Waitrose, the upmarket grocer owned by the John Lewis Partnership, rose 8.2 per cent as its new discount range continued to do well. Waitrose said that its heavily marketed Essentials range had met six-month targets in half that time. Mark Price, managing director, said: “Shoppers who would have come to us for a dinner party or a top-up can fill their baskets.”

The performance of Waitrose is in stark contrast to the food performance of Marks & Spencer. M&S, which, unlike Waitrose, does not have a discount range, is suffering like-for-like sales declines. Its market share was recently surpassed by Waitrose for the first time. M&S’s market share slipped from 3.7 per cent to 3.6 per cent on a total sales increase of just 1.8 per cent, according to Nielsen figures. Tesco’s market share dipped from 30.9 per cent last year to 30.8 per cent, while Asda’s stood at 17 per cent, compared with 16.7 per cent last year. Sainsbury’s market share hit 16 per cent.

Separately, grocery price inflation has dropped since last month. In the 12 weeks to July 12, grocery prices rose by 5.9 per cent, 3.2 percentage points below their rate of inflation in March, according to TNS.

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