Morrisons profits fall but trading improves: What the analysts say

“Morrisons’ trading performance looks to be improving with like-for-like sales up in the fourth quarter.

“Morrisons met its EBIT guidance, but has disappointed on net income. It has a strong balance sheet, but struggles to find a unique identity in the UK retail landscape.” – Bruno Monteyne, Bernstein

–

“We believe that after a period of sustained turmoil and ultimately decline, approximately 10 months into Mr Potts’ reign Morrisons ‎is in much safer hands, resulting in a more competitive business with a stronger financial constitution and a brighter future.

“Approximately 10 months into Mr Potts’ reign Morrisons ‎is in much safer hands, resulting in a more competitive business with a stronger financial constitution and a brighter future”

Clive Black, Shore Capital

“Those foundations are the basis for us to believe that profit growth can be re-established here on, for already sound solvency ratios to further improve and for shareholder-friendly initiatives to be considered as more of a probability than a possibility in due course.

“While this is so, it remains relatively early days in Morrisons’ long journey to return once again to being a great British retailer.

“Andrew Higginson, David Potts and Trevor Strain have moved mountains over the last year, securing Morrisons’ survival in our view. Given that the executive team was only fully completed in December 2015, that stabilisation has been a remarkable achievement to our minds; backed by the cash generation and deleveraging.” – Clive Black, Shore Capital

–

“Full-year profits and cash generation are in line with expectations and the four weeks of previously unreported like-for-like growth suggest only a modest slowdown from the solid Christmas performance.

“Profit guidance is more interesting, with management citing £50m-£100m of medium-term underlying profit before tax opportunity from broader business opportunities, including online and wholesale, but a cautious message on the core business, citing the need for ‘required investment in the proposition’.

“We think this is consistent with consensus which implies very modest underlying progress this year.” – James Collins, Stifel

–

“While Morrisons’ numbers have started to improve, and Potts is doing a good job, it’s hard to believe we are entering a new era for the struggling grocer.

“Morrisons had a half-decent Christmas in relative terms and the Amazon tie-up has put a spring in its step, but the market environment it is operating in remains as brutally competitive as ever.

“The discounters have gone nowhere, food deflation is entrenched and shopping habits are almost unrecognisable from a decade ago.

“Meanwhile, the elephant in the room is Asda, which overlaps the most with Morrisons in the North. Bankrolled by Walmart and implementing Project Renewal, Asda will become a superstore with discounter prices and is set to pose the biggest threat to Morrisons in the months and years ahead.” – John Ibbotson, Retail Vision