“Surveys in the immediate aftermath of the referendum showed a sharp dip in consumer confidence, leading to predictions of weak sales over the coming months. However, the post-referendum landscape has been characterised by surveys forecasting a sharp weakening of activity, which have thus far failed to appear in the hard data. Today’s figures show that, so far at least, it appears to be business as usual for the UK consumer,” he added.
Supermarkets like Morrisons, as well as department stores and fuel outfits all experienced robust sales growth relative to the previous year, according to the ONS data.
In sharp contrast with Next, the UK supermarket chain, which also reported its interim results Thursday, saw year-on-year growth in profit before tax and factoring in restructuring costs of 11.3%. The group also posted its third consecutive quarter of positive sales growth, taking total like-for-like sales excluding fuel up to 1.4% for H1 2016.
The Morrisons share rally was substantial, making the food retailer the highest riser of the FTSE 100 with 4% separating it from the second best performer.
While Morrisons is the second most shorted stock currently, said Mumford, the group’s performance today is evidence there are investment opportunities in the UK food retail space.
“Today’s Morrisons’ results confirm the company is doing a pretty good job of getting its house back in order. It has an advantage here thanks to its use of home grown produce, and there is also a very big technical position at play – around 18 per cent of the capital is out on loan suggesting a large technical short position which could lead to some burnt fingers if the company’s fortunes continue to recover. Morrisons is the second most shorted UK stock currently, with Tesco and Sainsbury’s not far behind. Should these positions be forced into reverse, prices will buoy. Admittedly if Sterling stays at the current level, input prices will continue to adversely affect margins, giving rise to inflationary pressures. This could in turn lessen the appetite for a price war.”
