ii view: Morrisons extends partnership with Amazon

Morrisons battles tough football comparatives, but looks to intensify its war online.

Half-year results  

• Revenue up 0.4% to £8.83 billion
• Like-for-like sales up 0.2%
• Adjusted profit up 5.3% to £198 million
• Interim dividend payment up 4.3% to 1.93p per share
• Special dividend of 2p, taking total interim up 2.1% to 3.93p per share

Chief executive David Potts said:

"We stayed focussed on our Fix, Rebuild and Grow strategy, and were pleased to maintain the momentum of the turnaround against strong comparatives last year. Sales and profit progress was robust, and we again invested in improving our competitiveness for customers.

"News today of new wholesale initiatives, including a further extension of our partnership with Amazon, and of another special dividend, again show how new Morrisons continues to become broader and stronger for all stakeholders, and how progress can be meaningful and sustainable even in more testing trading conditions. Such progress is only made possible by Morrisons exceptional team of food makers and shopkeepers."

ii round-up:

Operating around 500 outlets across the UK, Morrisons (LSE:MRW) is the country's fourth largest food retailer with a market share of nearly 11%. It purchased rival Safeway back in 2004. 

Its online business is currently conducted through arrangements with both Ocado (LSE:OCDO) and Amazon.com (NASDAQ:AMZN). 

It also supplies 1,300 McColl's (LSE:MCLS) convenience stores with its Safeway branded products, along with petrol retailers Harvest Energy and Rontec. 

For a round-up of these half-year results, please click here. 

ii view:

Competition in the UK's food retailing market is without doubt intense. Discount retailers Aldi and Lidl have both gained around 1% each in market share since the start of 2018, while higher-end competitor Marks & Spencer (LSE:MKS) is also, like Morrisons, partnering up with Ocado (LSE:OCDO) to execute its cyber offering. 

For Morrisons itself, six initiatives including lowering prices and refitting stores are being pursued. Its online offering is now being coached increasingly by Amazon, while management is also extending wholesale partnerships where possible, including a newly announced deal taking it overseas to supply Middle Eastern retailer Y-International. 

From an investment view, the management team at Morrisons is both well-respected and capable. A prospective dividend yield of over 4% offers attraction, too. That said, the shares are not cheap, and the industry will be watching the fight back from market leader Tesco (LSE:TSCO).

Positives: 

• An extension of its relationship with Amazon made
• Wholesale supply sales growing and have surpassed £700 million – on target for £1 billion
• Focus on returns - since 2014/15 dividends total 59.86p per share, equivalent to £1.4 billion

Negatives:

• Both Aldi and Lidl are gaining market share, aided by new store openings
• The war online is growing – M&S are also partnering up with Ocado
• Rivals such as Tesco are executing their own growth initiatives

The average rating of stock market analysts:

Hold