Morrisons full-year results - what the analysts say - Just Food
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Morrisons full-year results – what the analysts say

08 Mar 2012

UK retailer Morrisons this morning (8 March) booked an increase in full-year profits but said the country's grocery market is likely to remain subdued in the coming year.

UK retailer Morrisons this morning (8 March) booked an increase in full-year profits but said the country’s grocery market is likely to remain subdued in the coming year. Nonetheless, Morrison’s CEO Dalton Philips said the year had been the group’s “best year yet”. Here is a flavour of what leading retail analysts said about Morrisons’ recent performance.

“The company does have a number of self-help opportunities, namely from store productivity, refurbishments and improving efficiency in logistics. The market, however, is expected to get more competitive with Tesco investing significantly in service and the jury is out on whether the company is too late to capitalise on the opportunity in developing its internet, non-food and convenience store offers” – Seymour Pierce Research analysts

“With food inflation dropping off and its rivals making plenty of noises about price competitiveness, this is a pretty good set of results from Morrisons. The challenge for Morrisons is to maintain its core values and appeal as it continues to expand. Moves into online, non-food and convenience are all sensible and potentially lucrative. However, with each move to further stretch its influence, it risks being seen as just another ‘supermarket behemoth’ and losing a real advantage in differentiating itself from some of its rivals” – Conlumino analyst Neil Saunders

“A guarded outlook statement masks a strong performance over the last year, where Morrisons has exceeded profit expectations. The company would have been disappointed with its Christmas trading performance, which over recent years has marked a period of strength compared to its peers. In addition, the general economic outlook combined with the fiercely competitive market in which it operates will provide further challenges” – Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers

“The focus of management’s attention may now be really more about protecting what Morrison has rather than robust earnings growth. Such a view is conditioned by the strengthening performance of Asda (Wal-Mart) and the strong and sustained out-performance from Aldi, where value credentials are stronger than Morrison’s (i.e. they are cheaper) whilst there is improvement to come of sorts from Tesco UK, or at least the market leader is going to invest much more in its operating channels in an attempt to become more competitive” – Shore Capital analyst Clive Black”

Morrison’s FY results are marginally better (c1%) than consensus and our estimates. Morrison has confirmed this morning that “2012” will be a more difficult year for the industry in profit terms and issued a cautionary outlook for the year, not unexpected. The net result of the above is likely lower profit growth than is expected but ultimately higher capex due to Morrison’s growth and expansion initiatives, the scale of which has surprised us this morning (capex up 33% next year vs. underlying ex buyback profit growth of 7%)” – Matthew Truman, European food retail analyst, JP Morgan Cazenove

“The roll out of convenience format ‘M Local’ stores will be a priority in 2012 with 20 new store openings. Fresh remains central to the offer and Morrisons is determined not to compromise on the quality of the fresh offer despite the distribution challenges in fulfilling the needs of smaller stores. The hub and spoke model, using a larger supermarket to supply up to 6 convenience stores, will be challenging to role out on a large scale. With this in mind, the measured pace of convenience expansion fits well with the priority which is given to quality. The fresh offer in M Local stores sets a new standard for the convenience market and will challenge more established competitors to up their game” – Verdict Research