Eyes Down For Wm. Morrison Supermarkets plc’s Results

We’re looking at a slowdown for Wm. Morrison Supermarkets (LON: MRW)

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.

morrisonsShareholders in Wm. Morrison Supermarkets (LSE: MRW) (NASDAQOTH: MRWSY.US) haven’t had a great 12 months, seeing their price fall about 10% to today’s 232p levels. But look ahead to the latest forecasts, and it’s perhaps not hard to see why.

After four straight years of solid earnings growth, Morrisons is expected to record a 13% fall in earnings per share (EPS) for the year ended 31 January — and we are expecting to see the results on Thursday, 13 March.

The signs were there

At first-half time back in August, Morrisons had seen turnover of £8.9bn, which was bang in line with the first half of the previous year. But pre-tax profit was down 22% to £344m, although underlying EPS was reported to have fallen only 2% to 12.86p — and the company upped its interim dividend by 10% to 3.84p per share.

Net debt was up, too, by 50% from a year previously to £2,529m, with gearing up from 32% to 48%.

Morrisons.com was still some months away — although it is there now — and the company was just ramping up its local convenience stores. That’s been a problem for Morrisons for a while now, that it follows where others lead and doesn’t grab the share it could possibly achieve.

Weak Christmas

The Christmas trading period was a little disappointing too, with a 1.9% fall in sales for the six weeks to 5 January, excluding fuel. And worryingly, like-for-like sales fell by 5.6%, making it the weakest festive season out of our three listed supermarkets — in fact, the company’s trading announcement used the word “challenging” twice in the space of just 300 words.

And the board was not too upbeat about next week’s full-year results, saying it “expects that our full year underlying profit performance will be towards the bottom of the range of current market expectations” — with the range covering £783-853m at the time.

Watch those dividends

Analysts are still expecting Morrisons’ dividend to remain strong at a little above a 5% yield, but some will be a little concerned about its level of cover — it should be down around 1.8 times for the year just finished, which seems a little stretching for a company that is investing a lot of cash in its expansion programmes and is seeing debt rising.

There’s a modest 3% recovery in EPS forecast for the year to January 2016, but that’s a bit meaningless at this stage. Any return to growth is going to be dependent on that online offering and the convenience store rollout, so we should be watching out for tidings on those next week — and some early sales indications from Morrisons.com would not go amiss.

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.

> Alan does not own any shares in Wm. Morrison. The Motley Fool has recommended shares in Morrisons.

More on Investing Articles

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »