Morrisons results prove ‘no quick fix’: analysts
Shore Capital and Begbies Traynor both said ceo David Potts was in for the long haul as he tried to revive the retailers' flagging fortunes.
Half-year results to August 2 showed a 2.7% fall in like-for-like sales, as the supermarket prepared to sell its convenience business and announced the closure of 11 supermarket stores, threatening 900 jobs.
Shore Capital analysts Clive Black and Darren Shirley described Morrisons as a “metaphor” for the current British supermarket scene dogged by competitiveness and deflation.
‘Backdrop is very difficult’
A busy week for Morrisons
- Confirmed agreement to sell 140 convenience stores for about £25M in cash
- Published half-year results showing 2.7% fall in like-for-like sales and 47% drop in profits before tax
- Announced plans to close 11 supermarket stores, threatening 900 jobs
“It is clear from the company’s update that there is much to do, the backdrop is very difficult and there is no quick fix,” Black and Shirley said.
The analysts said statements from Morrisons suggested that there was “progress, resilience and confidence” about future prospects despite intermediate results.
“Morrisons is nothing but frank and realistic about the challenges that it faces,” they said.
“However, as outlined by Mr Potts, there is no quick fix and, indeed management speaks of it ‘taking time, and some components are still being developed or carefully reviewed by the new leadership team’.”
Responding to the half-year results published today (September 10), Begbies Traynor partner Julie Palmer also said more time was needed before delivering a verdict on recovery efforts.
‘Disappointing’ results for the supermarket
“Today’s disappointing results from Morrisons signal something of a baptism of fire for new ceo David Potts on his market debut, as he looks to refocus the supermarket group towards greater product availability and improved customer service at checkouts,” said Palmer.
"Despite the severe 35% slump in profits, the market should give Potts some time before criticising him too harshly, as there is hope he can continue to improve trading momentum in the core stores despite his ‘back to basics’ strategy hurting earnings in the short term."
For more information on half-year results click here.
Verdict from Shore Capital
“It is clear from the company’s update that there is much to do, the backdrop is very difficult and there is no quick fix.”
- Clive Black and Darren Shirley, analysts at Shore Capital
