5th November 2015
As Morrison’s updates the market Graham Spooner, investment research analyst at The Share Centre, explains what it means for investors.
Morrison’s shares are down 2.5% in early morning trading as the company reported a fall in sales during the third quarter. Investors should appreciate that in an attempt to keep its customers and attract others to shop in its stores, the group lowered prices.
However, this has led to a 2.6% fall in like for like sales. Although it may be good for the consumer, the increasingly competitive market place and ongoing price wars are continuing to make life tough for the UK’s supermarket chains.
These results follow on from some pretty average results in September. However, the CEO stated today that progress has been made during Q3. This involved many aspects of the company’s plan, which included improving the shopping experience, stabilise trading, cutting costs and improving the performance of its team leaders.
With the festive season looming, large investors will be keeping their fingers crossed that Morrison’s can maintain its market share. Nonetheless, they will be aware that Lidl and Aldi could turn out to be the pantomime villains in this scenario.
For long suffering investors who have seen the shares fall by around 38% over the last two years there are some positives worth noting. The group has highlighted its solid financial position and believes debt is expected to be lower than previous guidance by the year end. Despite this, we continue to recommend Morrison’s only as a ‘hold’ for medium risk investors with a balanced portfolio.
For investors interested in the sector, our preferred company to ‘buy’ is Sainsbury’s as the company leverages its range of shopping channels, diversifies its products and services and focuses on flexibility and convenience.