Morrisons share price tumbles even as turnaround picks up pace

Grocer posts drop in free cash flow

Morrisons share price tumbles even as turnaround picks up pace

Shares in Wm Morrison Supermarkets (LON:MRW) have fallen deep into the red in London this morning, even as Britain’s fourth-biggest grocer posted a rise in sales and profits. Investors, however, have reacted negatively to a drop in the company’s free cash flow.

As of 08:50 BST, Morrisons’ share price had given up 4.05 percent to 235.40p, underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.11 percent lower at 7,371.42 points. The group’s shares have added more than 23 percent to their value over the past year, and are up by nearly four percent in the year-to-date.

Morrisons announced in a statement this morning that its like-for-like sales had grown three percent in the half year to July 30, while its second-quarter sales had jumped 4.7 percent. The grocer’s underlying earnings per share meanwhile came in 14.9 percent higher at 5.79p, while reported profit before tax jumped 39.9 percent to £200 million. The company further hiked its interim dividend by 5.1 percent to 1.66p.

“This is another good performance from Morrisons. Our seventh consecutive quarter of positive like for like means that we are able to report profit growth on growth for the first time in the turnaround,” the group’s chairman Andrew Higginson commented in the statement. Investors, however, have focused on news that the company’s free cash flow fell to £352 million during the reported period, from £558 million a year ago.

The Times meanwhile quoted analysts at Jefferies as saying that Morrison’s strong results “reflect a successful reinvigoration of the retail offer, which has insulated Morrisons from wider consumer (and competitive) headwinds”.

“The industry outlook remains uncertain but Morrisons is better equipped than peers to deal with the unknowns,” the broker added. 

As of 09:22 BST, Thursday, 14 September, Wm. Morrison Supermarkets plc share price is 239.50p.

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