Morrisons shares punished after sales fall more than rivals
Ken Odeluga May 7, 2015 2:42 PM
<p>Morrisons has become the only ‘Big 3’ UK supermarket chain to report a significant deterioration in sales accelerating the crippling slowdown it faced last year. Britain’s […]</p>
Morrisons has become the only ‘Big 3’ UK supermarket chain to report a significant deterioration in sales accelerating the crippling slowdown it faced last year.
Britain’s fourth-largest grocer said on Thursday that like-for-like sales (sales at stores open over a year) fell 2.9% in the 13 weeks to 3rd May, Wm. Morrison Supermarket’s fiscal first quarter.
That compares with a fall of 2.6% in the last quarter of 2014, though the Q1 result was 0.1 of a percentage point above the average analyst expectation.
Whilst a different time frame was involved, Morrisons’ Q1 sales trend seems in line with data published a day ago by retail industry research firm Kantar Worldpanel.
Kantar found that whilst Sainsbury’s retail sales fell 0.2% during the 12 weeks that ended on 26th April and Tesco’s declined 1%, Morrisons’ fell the most—by 1.1% compared to the same period a year ago.
Whilst bearing in mind the timing of Easter this year and that Tesco edged MRW by just a fraction, Morrisons’ marginal underperformance of the latter and a more significant one against its closer listed rival Sainsbury’s together place it in a disadvantageous position in the UK grocery market.
Additionally, Morrisons’ official sales tally does nothing to allay the concern that it’s managing to stem the further decline, even if its retailing contraction has slowed since a like-for-like sales tumble of 7.1% in the first quarter a year ago.
The problem is, the magnitude of last year Q1’s collapse also provided an easy comparable for the supermarket to beat, adding a further order of relative slack to its performance.
As we’ve seen over the last year, during which UK supermarkets’ losses from the attack of the German discounters have come to a head, even marginal or relative gains by the Big 3 (or Big 4 including ASDA) will be applauded by investors.
The reverse applies too.
That helps explain the severe battering being meted out to Morrisons’ stock as this article was going online.
The shares traded 7% lower at 176p.
I see the stock now close to recognisable support; though there’s a risk that the market might be more comfortable with better corroborated support between 170p and 172p, especially in view of the divergence of current trading from longer-term momentum (see the MACD chart at the bottom).
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.