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A very strong Christmas trading update (best in 7 years) from supermarket Morrison (MRW) has allowed it upgrade profits guidance, helping its shares outperform this morning. This, coupled with a positive sector assessment of the Christmas period by surveyor Neilson, is giving a real boost to peers. Cost conscious shoppers putting it off until the last minute thanks to a spare day and mild weather helped discounter Aldi post sales growth of 10% in the final quarter, while incumbent behemoth Tesco posted respectable growth of 1.9% and Sainsbury’s suffered contraction.
Morrisons’ like-for-like sales growth of 2.9% excl. fuel (4.7% incl .fuel) in the 9 weeks to 1 Jan represented an improvement in growth well beyond consensus expectations, testament to management’s turnaround of both the business and the shares helped by an improved product offering and resilient consumer confidence in the face of Brexit uncertainty.
MRW shares were already on the up, and today’s news helps extend a breakout that began mid-September at 210p when a 2.5yr bullish inverse Head & Shoulders pattern was confirmed. This has potential to take the shares all the way to 285p, a level last traded in late 2013, although for now today’s highs of 250p represent the near-term hurdle they need to clear. All eyes on peer trading updates from Sainsburys (SBRY) on Wednesday and Tesco (TESCO) on Thursday. More of the same, or will MRW statements merely serve to highlight how much better it is doing versus its bigger rivals.
Mike van Dulken, Head of Research, 10 Jan
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