Stock of the day 12/01/2015 – WM Morrison Supermarkets PLC

Following Tesco leading a sector-wide rally last week following a rousing statement from its CEO Dave Lewis, Morrisons faces its own test with its Christmas trading statement from the period 6 weeks to 4 January 2015 on Tuesday.

2014 was a dismal year for the supermarket, after declines had begun in the second half of 2013. Disappointingly for the company, its starting price of £2.62 on the 2nd January 2014 also saw its year high of £2.63. From that point onwards Morrisons saw a near-uninterrupted fall throughout the year, culminating in a low of £1.51 in mid-October. The stalling of some declines in November meant that shares could recover slightly; however, this recovery was all relative, and the stock opened 2015 at £1.83, just shy of a pound lower than the year before.



Morrisons is expected to announce it was the worst performing supermarket among the big four over Christmas; and in a sector that has been haemorrhaging sales in the last year, being the worst truly is a black mark against the company. The pressure is piling onto chief executive Dalton Philips, whose £1 billion investment pledged to cut prices still hasn’t caused a decisive reversal of Morrisons’ sales declines.

The company’s share prices are currently caught between duelling expectations. On one hand, the acceptance that the supermarket sector is in the middle of a torrid time, and the fact that the rest of the big four have struggled with like-for-like sales, means that the slightest bit of better-than-expected news could see bullish sentiment from investors. However, with both Tesco and Sainsbury’s squeaking above analysts’ expectations, and the aforementioned rally caused by a sterling presentation by Tesco last week, Morrisons may now suffer if it merely reaches the figures analysts have predicted.

There are some positives for the company. Like-for-like sales for the period should only be down by 3.8%, compared to the 6.3% decline seen last year, a fall that caused a 5.6% drop in revenue. And the inclusion of sales from its newly established online shopping service will further flatter the like-for-like sales number; regardless of this providing a false reflection of Morrisons’ store performance, it will still present a more-welcome number to investors. And perhaps most importantly, Morrisons is currently the only supermarket price-matching the German upstarts Aldi and Lidl. It is minor differences between Morrisons and its bigger peers that may give the company hope for its statement tomorrow.