WM Morrison is still feeling the pinch

The supermarket will announce its first-half numbers on 10 September, and this will be the first set of figures under the new CEO.

WM Morrison
Source: Bloomberg

David Potts took over as CEO in March of this year, and since Morrison had a dreadful 2014 the market is eagerly anticipating news of Mr Potts’ plans to turn the supermarket’s fortunes around. Last year WM Morrison revealed its worst profit in eight years, and when you factor in the £1.3 billion in write-downs, it then swings to a loss.

As I stated previously, Morrison’s is being squeezed by deep-discounter retailers like Lidl and Aldi, along with other UK supermarkets, and their aggressive price-cutting plan is only benefitting the customers. Morrison’s is aiming to close 23 M Local shops, and investors can expect the dividend to be lowered also.

It will take a lot more than shutting a few underperforming stores and slashing the dividend to regain market confidence, but it will be a good start. Moody’s foresee a difficult 18 months ahead for the UK supermarket sector, and Morrison’s is the limping along in last place.

When WM Morrison reveals its first-half results, dealers are expecting revenue of £8.2 billion and adjusted net income of £81.5 million. During the last six months of last year, the supermarket revealed a revenue of £8.3 billion and adjusted net income of £91 million. The supermarket will announce its full-year results in March 2016, and the market is expecting revenue of £16.45 billion and adjusted net income of £246 million. These forecasts represent a 2% drop in revenue and a 9% rise in adjusted net income.

Equity analysts are bearish on WM Morrison’s, and out of the 23 ratings, six are buys, eight are holds, and nine are sells. The average target price is 187p, which is 11% above the current market price. Investment banks are bullish on Tesco, and out of the 27 ratings, ten are buys, 11 are holds, and six are sells. The average target price is 235p, which is 25% above the current price.

Morrison’s share price has been losing ground since September 2013, and the pressure remains to the downside, and 151p is the target. Should the stock experience any pullbacks it will encounter resistance at 188p, and at 215p respectively.

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