Can Wm. Morrison Supermarkets plc Make £1 Billion Profit?

Will Wm. Morrison Supermarkets plc (LON: MRW) be able to drive profits higher?

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.

morrisons

Right now I’m looking at some of the most popular companies in the FTSE 100 to try and establish whether or not they have the potential to push profits up to levels not seen in the last few years.

Today I’m looking at Wm. Morrison Supermarkets plc (LSE: MRW) (NASDAQOTH: MRWSY.US) to ascertain if it can make £1bn in profit. 

Have we been here before?

A great place to start assessing whether or not Morrisons can make £1bn in profit is to look at the company’s historic performance. Unfortunately, Morrisons has never been able to make £1bn in profit and it would appear that the company is not likely to do so in the near future.

Indeed, Morrisons’ best year was 2012 when the company reported a net profit of just under £700m. However, with the company’s like-for-like sales slumping last year, Morrisons net profit fell 7% to £650m for 2013.

Moreover, it would appear that things are only going to get worse for Morrisons as peer Tesco recently announced a multi-million pound plan to try and entice customers back to its stores. In addition, discount retailers such as Aldi and Lidl continue to grab market share, leaving Morrisons suck in the middle, trying to compete with much larger, more aggressive peers. 

But what about the future?

With competition in the grocery sector increasing, already struggling Morrisons is going to have to work extra hard tempt customers back in to the company’s stores. Unfortunately, this may mean that the company will have to aggressively discount its products, which usually leads to rising sales but at the expense of profits.

Still, Morrisons continues to expand its presence in the UK’s retail market in an attempt to reach more customers, especially in the South of England where the company is underrepresented.

Additionally, Morrisons recently launched its online delivery service and management is planning on doubling the number of Morrisons-branded convince stores over the next year or so. Nevertheless, with like-for-like sales slumping more than 5% in the six weeks to 5 January, the company is going to have to do more than open more stores to boost profits.

It would appear that City analysts also agree with this view. Current City forecasts expect Morrisons to report a pre-tax profit of £731m for 2014, more than 10% lower than the figure of £880m reported for 2013. What’s more, current projections predict that Morrisons’ pre-tax profits will fall a further 6% to £684m for 2015. 

Foolish summary

So overall, as Morrisons is struggling to drive sales growth and compete in the UK’s vicious retail sector, I feel that the company cannot make £1bn profit. 

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.

Rupert owns shares in Wm. Morrison Supermarkets. The Motley Fool has recommended shares in Wm. Morrison Supermarkets.

More on Investing Articles

Investing Articles

If I’d put £10,000 into Meta stock at the start of 2024, here’s what I’d have now

Our writer looks at the year-to-date performance of Meta stock and considers whether he'd consider buying this magnificent tech share.

Read more »

Hand arranging wood block stacking as step stair on paper pink background
Investing Articles

Investing £5 a day in this dividend giant can make me a £14,067 annual second income!

This FTSE 100 high-yield star can make me a major second income, supported by a strong business outlook and an…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Taylor Wimpey shares yield a fabulous 6.41%, but is the dividend safe?

Harvey Jones has enjoyed plenty of growth and income after buying Taylor Wimpey shares last year. But is today's high…

Read more »

Yellow number one sitting on blue background
Investing Articles

1 FTSE lithium stock I think could be ready to rocket

Jon Smith explains why the lithium price could be due a rally, and why shares of one related FTSE stock…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
US Stock

This growth stock that Warren Buffett owns just hit 52-week lows. Should I buy?

Jon Smith flags up a high-profile US stock that the great Warren Buffett bought back in 2020 but which has…

Read more »

White female supervisor working at an oil rig
Investing Articles

Could the UK general election be bad news for this FTSE 250 energy producer?

The country is due to vote in the general election on 4 July. Our writer looks at the possible implications…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Should we buy cheap FTSE 100 shares now, before it’s too late?

The FTSE 100 is up 5% so far in 2024 and hit an all-time high in May. That means the…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

Here’s why I think the Lloyds share price could hit a 5-year high in 2024

It's up 13.5% so far in 2024, and reaching new highs. But where might the Lloyds Bank share price go…

Read more »