Morrison (Wm) Supermarkets Ordinary 10p (MRW)

Company overview

Originally founded by William Morrison in 1899, it started out as an egg and butter stall in Rawson Market, Bradford, England. Today Wm Morrison Supermarkets PLC is the fourth largest chain of supermarkets in the United Kingdom, headquartered in Bradford, West Yorkshire. The company is usually referred to and is branded as Morrisons, and is part of the FTSE 100 Index of companies. Morrisons operates over 400 supermarkets across the UK. The group currently employs around 130,000 staff working in stores, factories, distribution centres and at its head office. Approximately nine million customers visit the group’s stores each week.

HL Comment (9 January 2012)

In its post-Christmas trading update announced today, (9 Jan) Morrisons, the UK's fourth largest grocer saw sales growth slow over Christmas. Like-for-like sales at stores open for a year or more rose 0.7%, excluding fuel and VAT for the six weeks to January 1. That figure was lower than analysts' forecasts of around 1% and compared with 2.4% growth in its third quarter. The slowdown came despite Morrisons recording record numbers of customers over the festive period, with an extra 800,000 shopping per week during the period. Against a challenging backdrop, the group’s financial expectations for the full year remained unchanged.

Negative Points:

• Management continues to express caution, noting that the economic environment had remained challenging during the Christmas period and will remain so into 2012, despite an anticipated reduction in inflationary pressures.
• Many British retailers are struggling as disposable incomes are squeezed by higher prices, muted wage growth and austerity measures. Stagnant house prices, rising unemployment and the euro zone debt crisis also remain a concern.
• Competition remains rife with aggressive industry pricing. Low cost operators such as Aldi remain a threat. Other operators such as Sainsbury are also expanding their store space, including convenience stores.
• Unlike its larger rivals, Morrisons does not currently have an online offering.

Positive Points:

• Food retailers have fared better than their non-food counterparts since the retail squeeze began in earnest early last year. Morrison's has the smallest exposure to non-food sales of the four U.K. large supermarket chains.
• Unlike its major rivals, Morrisons produces much of the food it sells.
• The group had previously announced a £1 billion share buy-back scheme to be implemented over two years. To date, the company had acquired 108.3m shares at a total investment of £316.6m.
• The Group's financial position remains strong, according to management.

Consensus:

On balance, market consensus indicates a cautious buy.

All yield figures are variable and not guaranteed.

Fundamental Data

Values are quoted in the stock's local currency: British pound.