Blog: Dean BestAre Morrisons' investors miserable now?

Dean Best | 6 May 2010

Some in the City took a swipe at Morrisons today (6 May) after the UK's number four grocer said sales had slowed in its fiscal first quarter.

In a note titled 'William, it was nearly nothing' - fans of The Smiths will enjoy that - analysts at Oriel Securities said Morrisons, the fastest-growing of the largest UK grocers in recent years, had "come back to the pack" after sales inched up 0.8% in the 13 weeks to 2 May.

"We understand that the maths of the comparative meant that eventually Morrisons would come back to the pack but it was always going to be an interesting moment when it actually happened," the analysts wrote.

Oriel questioned whether Morrisons had "lost a bit of its marketing verve" or whether the possibility of UK consumers trading up (itself a subject of fierce debate) has hit the retailer.

The analysts even asked whether Morrisons had "lacked leadership" after the departure of Marc Bolland to Marks and Spencer and the arrival of Dalton Philips from Loblaw.

"It wouldn't really be a surprise if this was the case, but it ups the pressure on Mr Philips when he starts to dictate strategy," the Oriel analysts added.

Over at Sanford Bernstein, the analysts, who declined the chance to give a nod to any 1980s cult indie bands, said Morrisons was "no longer a turnaround stock", with sales and margins improving since its acquisition and challenging integration of Safeway.

The Bernstein analysts said Morrisons' first-quarter sales had missed expectations but said the retailer was still "performing fractionally ahead of the market".

And therein lies the key takeaway from Morrisons' numbers this morning. The retailer is facing both tough comparatives to its recent buoyant sales growth and is operating in a UK grocery market characterised by food deflation and fierce promotional activity.

At the moment, Morrisons seems to be out-performing its rivals but competition, as exampled by Asda's Price Guarantee announcement last week, will only intensify.

Perhaps, when new chief executive Dalton Philips speaks to the market for the first time in September, he will set out plans for Morrisons' next phase of significant growth.

And perhaps a substantial non-food offer and an online presence will figure in the Morrisons basket at last.


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