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September 8, 2011

Morrisons H1 results – what the analysts say

Shares in Morrisons had risen by more than 4% today (8 September) after the UK's fourth-largest retailer had reported improved half-year sales and profits - and provided some update on its plans for own-label, the convenience sector and an online service. Here is what some of the City's retail analysts had to say.

By Dean Best

Shares in Morrisons had risen by more than 4% today (8 September) after the UK’s fourth-largest retailer had reported improved half-year sales and profits – and provided some update on its plans for own-label, the convenience sector and an online service. Here is what some of the City’s retail analysts had to say.

Christopher Hogbin, Sanford Bernstein

Morrisons reported a solid H1 performance. Like-for-like (ex fuel, ex VAT) sales growth declined slightly from 2.5% in Q1 to 1.9% in Q2, with the contribution from new space increasing to 2.1% in Q2 from 1.7% in Q1. In terms of total sales growth, per Kantar data, Morrisons outperformed the grocery market by 0.8% in H1. Reported EBIT margin remained flat at 5.2% in H1 despite the dilutive impact of increased, lower margin, fuel sales and the “start-up” costs of Morrisons’ various strategic initiatives – suggesting a strong improvement in underlying margin reflecting Morrisons’ solid trading performance against the context of a competitive environment that remains rational.

Mike Dennis, MF Global

Morrisons H1-12 results came in ahead of expectations on most metrics. The key factor for us is the combination of strong sales and profits growth despite the substantially weaker consumer environment and higher promotional participation.

Richard Hunter, Hargreaves Lansdown

With the pressed consumer in mind, the company has where possible refrained from passing on inflation, something which has been achievable due to a combination of strict cost control and in-house food production. Indeed, in a fiercely competitive marketplace Morrisons’ products are seen as being particularly keenly priced, which has fed through to a record number of visitors over the period. Whilst the group lacks the geographical diversification of some of its rivals, its defensive nature is playing out in a tough environment.

Clive Black, Shore Capital

Morrisons has delivered a resilient performance in our view, outperforming in revenue growth terms on a like-for-like (LFL) basis its superstore peers with in-store (ex-VAT) growth of 2.2%, a commendable achievement. In transparently difficult times it is steering a good course and management deserves credit for the sustained performance and progress that is being made. Much still needs to be clarified as to the benefit or otherwise of the programmes and initiatives that are underway to improve and develop the business, but we see the market as taking an appropriate and proportionate view on the risk-reward equation.

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