RETAIL ROUNDUP: Morrisons Misstep Highlights Polarized Retail

By Kathy Gordon

LONDON--Disappointing festive sales from grocer Wm Morrison Supermarkets PLC (MRW.LN) Monday underscored an increasingly polarized retail sector as hard-up shoppers searched out bargains online or at discount stores.

The U.K.'s fourth-largest supermarket chain reported a 2.5% decline in same-store sales excluding VAT and fuel in the six weeks to Dec. 30, broadly in line with expectations, and avoided a profit warning by maintaining tight cost control.

Morrisons is the only major supermarket without an online grocery offer or an established convenience store network, the dearth of which is beginning to impact growth potential, while competition from discount stores like Aldi and Lidl are eating away at all the quoted retailers.

Chief Executive Dalton Philips told reporters Monday that he will reveal online grocery plans in March but insisted that Morrisons could benefit from "late-mover advantage" avoiding the pitfalls of its rivals and focusing on profitability.

Online grocery currently accounts for around 5% of U.K. grocery sales but is growing at 20% a year, and web sales across the sector are proving a key differentiator among hard-pressed retailers.

Clothing chain Next on Thursday reported a 3.9% rise in sales between Nov. 1 and Dec. 24, buoyed by its popular online and directory business, which offset continued decline in retail store like-for-like sales.

Morrisons is widely expected to have been the low point in supermarket retail updates. J Sainsbury PLC (SBRY.LN) and Tesco PLC (TSCO.LN) are due to report Wednesday and Thursday, respectively, and are expected to have enjoyed positive sales growth.

After five years of austerity, intermittent recession and constrained consumers, the polarization of the retail sector remains stark. The number of retail failures has been growing steadily, with 194 going to the wall in 2012, according to Deloitte, up from 183 and 165 in the prior two years. The next two weeks will expose the winners and losers.

Retail sales data from the British Retail Consortium due Tuesday will shed more light on the difficulties faced by the sector.

Still To Report:

Jan 8: Debenhams PLC

Jan 9: J Sainsbury PLC; Ted Baker PLC

Jan 10: Marks & Spencer Group PLC; Tesco PLC

Jan 15: Ocado Group PLC

Jan 17: Home Retail Group PLC; AB Foods PLC; Dixons PLC

Jan 24: Carphone Warehouse Group PLC

Feb 7: Supergroup PLC

-Write to Kathy Gordon at [e-mail]

By Kathy Gordon, Dow Jones Newswires; 44-207-842-9293; [e-mail]

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