5 Ways Wm. Morrison Supermarkets plc Could Make You Rich

WM. Morrison Supermarkets plc (LON: MRW) has found the going tough lately.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.


Wm. Morrison Supermarkets (LSE: MRW) (NASDAQOTH: MRWSY.US) is a declining stock in a declining sector. But here are five ways it could still make you rich. 

1) By implementing a massive turnaround

Morrisons is bottom of the big four supermarkets right now. Not only is its market share lower than Tesco, Asda and J Sainsbury, it is sinking faster as well. Morrisons was crunched over Christmas, and the squeeze has continued this year. Sales fell 4% in the four weeks to 2 February, according to latest data from Kantar Worldpanel. This makes troubled Tesco (down 0.8%), Asda (down 0.7%) and Sainsbury’s (up 0.1%) look flourishing by comparison. The big question is whether management at Morrisons can do anything about it.

2) And making up lost ground

Morrisons isn’t just in decline, it is declining in a declining sector. The grocery market is “very tough”, management admits. But Morrisons has made things tougher for itself, by failing to build a booming online business, and coming late to the convenience store party (Sainsbury’s and Tesco are already in full swing). But there is hope. It is belatedly expanding its chain of M Locals, and now has more than 100 stores. Its online food operation is (finally) ready. These two developments may help it to claw back lost ground.

3) Through a takeover

I’m always wary about buying into a company on takeover speculation, which all too often never materialises into a bid. But if that’s your bag, you might want to consider Morrisons. It shares surged earlier this month, on reports that its family founders, who still own roughly 10% of its shares, were trying to set up a £7 billion private equity buyout. President Ken Morrison has poured scorn on the suggestion, but rumours persist. Its lucrative property assets could make it a tempting target. I don’t invest on takeover speculation, but you might.

4) Because it’s cheap

When your share price falls 18% over two years, two interesting things happen. First, your stock valuation falls. Morrisons currently trades at just 8.8 times earnings, against 9.3 times for troubled Tesco and 11.4 times for soaring Sainsbury’s. The second nice thing is that your dividend yield rises. Morrisons now yields 4.92%, covered 2.3 times. That pips Tesco at 4.44% and Sainsbury’s at 4.77%. Buy now and you’re getting a bargain bin valuation with a handsome income stream thrown in. Then all you have to do is patiently wait for the business to recover. Although you might have to be very patient.

5) By beating forecasts

If you’re still tempted to take Morrisons to the till, check out its earnings per share (EPS) forecasts. After falling 13% in the year to 31 January, EPS are forecast to drop another 5% in the next 12 months. Things should pick up after that, just, with forecast 3% growth in the year to 31 January 2015, which should take the yield to 5.3%. Strong-stomached, far-sighted investors may be willing to shop at Morrisons. If it cracks online and convenience shopping, they may be rewarded, given that online grocery sales are forecast to double to £11.1 billion by 2017, and the convenience store market looks set to grow 29%, according to The Institute for Grocery Distribution. So there is something for management to aim at.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Harvey owns shares in Tesco. The Motley Fool owns shares in Tesco and has recommended shares in Morrisons.

More on Investing Articles

Happy young female stock-picker in a cafe
Investing Articles

No savings at 25? I’d start by investing £3k in these 3 red-hot FTSE 100 shares

Harvey Jones thinks these three FTSE 100 stocks would be a great way to kickstart a portfolio of UK shares.…

Read more »

Young Black woman using a debit card at an ATM to withdraw money
Investing Articles

Up 35% from this year’s low! Here’s where I think Lloyds shares are headed in H2 of 2024

My Lloyds shares are already doing well this year but that’s not guaranteed to continue. What factors could turn the…

Read more »

Investing Articles

Approaching £5, is there still growth ahead for the Rolls-Royce share price?

The Rolls-Royce share price has been flying in the last year. But is there more growth ahead or should investors…

Read more »

Happy young plus size woman sitting at kitchen table and watching tv series on tablet computer
Investing Articles

Could Raspberry Pi be a growth share to buy and hold?

Our writer explains why he thinks a newly-listed UK growth share could have a bright future -- and considers whether…

Read more »

A pastel colored growing graph with rising rocket.
Market Movers

The FTSE 100 jumps after the Bank of England meeting. Here’s what’s next

Jon Smith runs over the takeaways from the Bank of England meeting today and flags up which FTSE 100 stocks…

Read more »

Middle-aged white male courier delivering boxes to young black lady
Investing Articles

How I’d start investing in great value UK shares with £10,000 today

Harvey Jones can see a heap of UK shares he'd like to add to an ISA today. Many combine low…

Read more »

Young Black woman looking concerned while in front of her laptop
Investing Articles

Why did the YouGov share price just crash 37%?

The YouGov share price has been weak for a while. But that's nothing compared to what happened after this profit…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

YouGov shares collapse 37%! What’s going on with this AIM stock?

Our writer takes a look at why YouGov shares fell dramatically today and assesses whether this might be a chance…

Read more »