No cheer for Morrisons after Christmas numbers
8th January 2019 11:02
by Richard Hunter from interactive investor
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This grocer has struggled since summer ended, and these Christmas numbers have failed to inspire investors, writes Richard Hunter, head of markets at interactive investor.
Morrisons has for the most part contributed to a Christmas period in the UK which can be summarised as so far, so good. It hands the baton over to its larger rivals in good shape, although numbers from Tesco and Sainsbury's are likely to eclipse this update.
Like-for-like sales growth has been largely driven by wholesale, which is a core part of the company's strategy, up 3%. Like-for-like retail sales grew by 0.6% in the nine weeks to 6 January, although this growth was slower than the previous year.
Meanwhile, the fact that this update represents the fourth consecutive growth in the festive season is testament to the fact that Morrisons can up its game when required at the right time. And, from an investment perspective, while the projected dividend yield of 3.2% is fair to middling, it is underpinned by a special dividend as announced at the halfway stage back in September.
The strength of this update has also enabled Morrisons to leave its previous full-year guidance unchanged.
Source: TradingView (*) Past performance is not a guide to future performance
However, pressure remains on all sides. A resurgent Tesco, the proposed Asda/Sainsbury's alliance and the continuing advance of Aldi and Lidl (the former of which just announced its best ever Christmas) all add to a challenging environment.
Meanwhile, while improved, Morrisons still lags in comparison to its larger rivals in the increasingly important channels of online and convenience stores. In addition, the figures overall are shy both of analyst expectations as well as the same period last year.
On the whole, however, Morrisons has a plan and is beginning to deliver it. The shares have fallen foul of the wider and weaker market environment, having dipped 14% over the last six months, although over the last year the 2.5% decline in the price compares favourably with the FTSE 100, which has dropped 11.5% in the corresponding period.
With the bar expected to be high in terms of forthcoming updates from the other supermarkets, the general market consensus of the shares as a hold tends to suggest that investors consider there to be better value elsewhere.
*Horizontal lines on charts represent levels of previous technical support and resistance. Trendlines are marked in red.
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