Morrison (Wm) Supermarkets (MRW) Ordinary 10p
HL comment (7 November 2013)
More positively, the company is attempting to address the shortfall. The CEO noted that "we are progressing well with our plans to develop a significant presence in these channels" (convenience and online). For now, analysts remain concerned as to whether the group can regain lost ground, with consensus opinion currently pointing towards a sell.
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- Same store or like for like sales declined by 2.4% (down 3.0% including fuel)
- Total store sales excluding fuel rose by 1.0%
- A further 36 M local convenience stores opened
- On track to have 100 M local stores open by the end of the current year
- Although in line with management expectations, like for like sales continued to retreat. Like-for-like sales declined by 2.4%. Management noted that "as previously indicated our low exposure to the sector's key growth areas of convenience and online continues to impact the sales performance of the Group."
- The grocer has been slow in developing an online presence. Previous data forecast online grocery sales in the UK to double to £11.1 billion and the convenience-store market to expand by 29% by 2017 (Source: The Institute for Grocery Distribution).
- Accompanying group outlook comments highlighted that "we expect the market to remain challenging for the remainder of the year and continue to manage the business tightly."
- Group net debt increased to £2.7 billion (2012/13: £1.68 billion).
- Unlike some rivals, the group does not enjoy any degree of international diversity.
- The third quarter performance was in line with management's own expectations.
- The CEO noted that "we are progressing well with our plans to develop a significant presence in these channels (convenience and online). In January 2014, as planned, we will commence online food deliveries in Warwickshire direct from the Dordon CFC followed by an extension to Yorkshire shortly thereafter, using a delivery spoke in Leeds. By the end of 2014 we expect to be serving over 50% of UK homes, including London."
- A further 36 M local convenience stores were opened during the quarter bringing the total to 69 across the country, of which around half are in London and the South East, the important growth area for Morrisons. The group is on track to have 100 M local stores open by the end of the current year. Management confirmed a target to open a further 100 M locals in 2014/15.
- Its Fresh Format concept was introduced into a further 42 stores, including two new stores during the quarter. Management noted that "the performance of these stores and customer feedback remain strong."
- Capital expenditure will reduce in the financial year 2014/15 to around £850 million (2013/14 forecast: £1.2 billion). Thereafter, management expects the annual rate to be maintained at around £650 million.
- Cost containment remains in focus. An IT system replacement programme is currently being implemented.
- In March 2011, the group committed to a minimum annual dividend increase of 10% for three years. The current year is the final year of that commitment. From 2014/15 onwards management anticipates a progressive dividend policy.
All yield figures are variable and not guaranteed.
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