The squeeze on household spending took its toll on Morrisons, which saw like-for-like sales slip by a percentage point in its first quarter – the first underlying sales decline since its acquisition of Safeway in 2005. However, the fall was no worse than analysts had expected, and with no impact on full-year profit expectations or the grocer's ability to deliver against its strategy, we're sticking to our buy advice.
Although Morrisons is undoubtedly being affected by rivals' aggressive promotional activity, analysts still expect pre-tax profits to climb to £961m this year. That's supported by continuing costs savings, which should total around £100m this year, and longer-term plans to broaden the group's convenience and online offers remain on track.
