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Morrison (Wm) Supermarkets (MRW) Ordinary 10p

Sell:227.80p Buy:228.00p 0 Change: 1.15p (0.50%)
FTSE 100:0.32%
Market closed Prices as at close on 18 January 2018 Prices delayed by at least 15 minutes | Switch to live prices |
Sell:227.80p
Buy:228.00p
Change: 1.15p (0.50%)
Deal now Deal for just £11.95 per trade in a ISA, Lifetime ISA, SIPP or Fund & Share Account
Market closed Prices as at close on 18 January 2018 Prices delayed by at least 15 minutes | Switch to live prices |
Sell:227.80p
Buy:228.00p
Change: 1.15p (0.50%)
Market closed Prices as at close on 18 January 2018 Prices delayed by at least 15 minutes | Switch to live prices |
Deal now Deal for just £11.95 per trade in a ISA, Lifetime ISA, SIPP or Fund & Share Account
The selling price currently displayed is higher than the buying price. This can occur temporarily for a variety of reasons; shortly before the market opens, after the market closes or because of extraordinary price volatility during the trading day.

HL comment (9 January 2018)

A strong Christmas and increased Wholesale activity drove a higher rate of like-for-like (LFL) sales growth in the ten weeks to 7 January. Total sales over the same period rose 2.6% excluding fuel, or 2.8% including fuel.

The shares rose 4.5% in early trading.

Our View

CEO David Potts' plans for Morrison make perfect sense; focus on the consumer, reinvest in pricing and improve the stores' appeal. He may still describe the group as a work in progress, but that progress is increasingly tangible. Customers are coming back and like-for-like sales are firmly back in positive territory.

His plans don't stop there either.

His vision of a 'new Morrisons' includes a batch of capital-light wholesale agreements. Deals have been signed to roll out convenience stores on petrol forecourts in partnership with Rontec, supply Amazon Fresh with groceries and revive the Safeway brand through a deal with McColl's. The group is targeting annual wholesale sales in excess of £700m by the end of 2018, and more than £1bn in due course.

With the majority of stores owned rather than leased, the group already has strong cash flows, which help support the dividend. The shares currently offer a prospective yield of 2.9%, and analysts expect the payout to rise over the coming years.

However, potential investors should remember that there are still a few weak spots in the business. Morrisons is lacking a convenience footprint of any scale and its online offering relies on a partnership with Ocado. Wholesale is growing rapidly, but we've yet to get an idea of what the margin looks like on these agreements.

Furthermore, conditions in the sector are far from supportive. An increasingly price-sensitive customer has led to fierce competition, squeezing margins across the board. With real wages falling, it's difficult to see this trend changing anytime soon.

Nonetheless we feel that David Potts is steering the ship in the right direction. A focus on value and service is clearly appealing to customers and a healthy balance sheet gives the company room for manoeuvre. That could prove vital, because there's still plenty of space for improvement.

Register for updates on Morrisons

Christmas Trading Update

LFL sales growth over the festive period hit 2.8% (versus 2.5% in Q3) with Retail contributing 2.1% LFL growth and Wholesale 0.7%. The Christmas to New Year period was especially strong, with LFL growth of 3.7%.

Despite the weak pound increasing the cost of stock, Morrison has continued to focus on competitiveness, with the price of a basket of key Christmas items the same as last year. As a result the group saw an increase in LFL volumes and a 2.3% increase in transaction numbers.

Morrisons.com sales grew over 10%, as the store pick service continued to expand. Across the wider business, the 'Best' range continues to perform well, with sales up 25%, while 'Food to Order´ sales rose over 50%. The revamped Home & Leisure range is reportedly proving popular with customers.

The strong Wholesale performance in the period was supported by the supply of tobacco to McColl's earlier than initially planned. The agreement to start supplying all 1,650 McColl's stores with both Safeway products and national brands will begin this month - adding around 25 additional McColl's stores each week.

Full year expectations remain unchanged.

Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.


Previous Morrison (Wm) Supermarkets updates

Data policy - All information should be used for indicative purposes only. You should independently check data before making any investment decision. HL cannot guarantee that the data is accurate or complete, and accepts no responsibility for how it may be used.
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