Morrisons: What the analysts say

“The roll-out of fresh format stores is driving towards its goal of 100 by March 2013. With sales uplift of 4-6% in refurbished stores it is imperative that the pace of roll-out quickens to mitigate against the decline in sales in older stores. The retailer’s convenience format M Local is on course to reach 20 stores by March 2013 but with seven currently trading there is a lot for the retailer to do. This expansion, coupled with improved marketing communication, should help Morrisons to reverse its fortunes in 2013 and realise the potential which its strategic direction offers.” - Cliona Lynch, Senior Retail Analyst, Verdict Research

“There is no doubt that Morrison’s low participation in the convenience market and its on-going absence from grocery online contributes to its underperformance against the sector. However, we do not believe it is the prime cause. Rather, we are of the view that Morrison has re-engineered its proposition in a way that is ‘disenfranchising’ its core customers. That change implies a move too far away too soon from its value roots to our minds. Correspondingly, we are of the view that Aldi and Asda in particular have been direct beneficiaries of this development, fascias that retain strong value credentials.” - Clive Black and Darren Shirley, Shore Capital

“Morrisons is currently highly active and developing a whole host of initiatives. Over the medium to longer term we believe all of these things will pay dividends. However, in the short term they do not appear to be moving the dial which suggests that there are other underlying issues. The first of these is a more competitive marketplace in which price has become much more important. The second issue extends from the first and revolves around differentiation. There is no clear USP that distinguishes Morrisons from the competition. The retailer needs to give the consumer clear and compelling reasons to visit them. It also needs to work on how this is communicated.

“Overall, we believe that Morrisons is a well-run company with good prospects. However, the key challenge going forward will be to balance longer term aspirations and strategies with shorter term tactics to drive footfall and spend.”- Joseph Robinson, Conlumino

“It is good to see Morrisons admit that it needs to improve its promotional and marketing effectiveness, but when it says “we have put in place a number of measures to enable us to achieve this” we didn’t think that would mean the likely departure of its well-regarded commercial director Richard Hodgson. The third quarter trading update is disappointing, but the cost control in the business must be eye-wateringly tight, as Morrison’s say that full-year profits will be only slightly below its expectations (ie “broadly” in line).” - Nick Bubb, independent retail analyst