Morrisons upgraded to ‘equal weight’ by Barclays

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WM Morrison Supermarkets PLC (LON:MRW) was upgraded to ‘equal weight’ from ‘underweight’ by Barclays as analysts pointed out the share price is now clearly below its price target.

The bank said it finds it “harder to construct a bearish narrative” on the supermarket considering that relative market share trends have been showing clear improvement after a weak 2019.

READ: Morrisons, Waitrose remove glitter from Christmas products

Moreover, there is the prospect of much better second-half profits and cash generation, with the possibility of a dividend of around 15p in March 2021.

Supermarket sales have been picking up recently after UK coronavirus restrictions become tighter in more areas around the country.

Grocery sales swelled 9.4% during the 12 weeks to October 4, 2020, according to Kantar, with the most recent four weeks seeing growth of 10.6% compared to 8% in the preceding four-week period.

Morrisons continued to enjoy the strongest growth among its competitors, with sales rising 11.5% that helped lift its share 0.2 percentage points to 10.1%.

The chain’s last update was in September, when it posted an 8.7% jump in sales in the 26 weeks to August 2, however total revenue of £8.7bn was down 1.1%, significantly impacted by a near absence of fuel demand during the pandemic lockdown, which was said to be rebuilding.

The statutory profit before tax tumbled 28% to £145mln due to £155mln of direct costs during the half resulting from COVID-19, including extra payroll and bonuses, protection measures, extra waste and distribution, with food bank and other donations also included, meaning a net cost of £62mln thanks to a £93mln benefit from lower business rates.

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