Morrisons shares take a bath but the numbers aren't all bad

Britain's fourth largest supermarket chain missed analysts' forecasts for its third quarter, but industry figures indicate that shouldn't come as a surprise

Morrisons: Supermarkets latest figures have disappointed the markets (PA)

Is the Morrisons miracle over?

From the reaction of the market to the latest numbers you could almost believe it. Shares in Britain’s number four supermarket chain took a bath, despite it reporting sales growth of 5.6 per cent for the three months ending November 4 (for stores open at least a year).

The problem with that number is that, while it looks pretty, if you break it down you get just 1.3 per cent for the core supermarkets, 4.3 per cent for Morrison’s wholesale business that supplies products to others (McColl’s, Amazon).

The City had expected the supermarkets to turn in something like 1.8 per cent and the total to come in at 6.1 per cent. The wholesale part is doing better than expected. But the margins there are lower.

In the round, these figures represent something we haven’t seen from Morrisons for a long time: they’re a miss. But was the market right to lop 5 per cent or more off the company’s value? Perhaps not.

After the mini boom grocers enjoyed during the balmy summer, when Morrisons recorded sales growth of 6.3 per cent, it’s really not all that surprising that it has come back to earth.

The company has also suffered the disadvantage of going first. These numbers might look rather better in the wake of the context that will be provided by what its rivals have to say over the next couple of weeks. The British Retail Consortium put out industry wide figures this morning which suggested that they may not be too cheerful. The trade body's figures showed industry wide food sales grew by just 1.2 per cent.

That number is for three months to October 27. One thing that bedevils retail is that all the main players have slightly different reporting periods, which makes comparisons tough. But what the BRC highlights is a softish quarter across the industry. October was particularly slow.

If anything, Morrisons is getting punished for the high expectations the City now has for the business, which has turned in three straight years of growth, a tick or two above expectations in most quarters.

It's always worth remembering what a desperate state the company was in when David Potts took over as CEO, at a time when there were very real questions being raised about its future.

Analysts haven’t rushed to downgrade their profit forecasts on the back of this latest update. A decent Christmas, which the company is talking up, and everyone will have forgotten about these numbers, which really aren’t all that bad.

There are still clouds on the horizon. The fallout from a data scandal, and an equal pay legal claim could both prove extremely costly. Then there's Brexit. It’s a storm that could drench not just the supermarkets but the whole country. But Morrisons is in a position to weather challenges. That’s not something you could have said a few years ago.