While a restructuring at Wm Morrison Supermarkets (LON:MRW) is paying off for the supermarket, The Share Centre argues that competition is still fierce in the sector and margins are unlikely to reach historic levels, Citywire reports. The comments came after the blue-chip group updated investors on its full-year performance yesterday, posting a rise in like-for-like sales and announcing a special dividend.
Morrisons’ share price closed higher in London in yesterday’s session, adding 0.60 percent at 226.50p, outperforming the benchmark FTSE 100 index which ended trading 0.11 percent higher at 7,159.19 points. This morning, the shares have retreated, having given up 1.10 percent to 224.00p as of 08:03 GMT, as compared with a 0.05-percent gain in the Footsie.
The Share Centre weighs in on Morrisons
Citywire reported yesterday that The Share Centre’s analyst Helal Miah retained his ‘hold’ recommendation on Morrisons for investors “looking for a balanced return and willing to accept a medium level of risk”.
“In a challenging general retail environment and with still fierce competition in the grocery market, these results show Morrison’s strategies […] are paying dividends,” the analysts pointed out, adding that, however, competition was “here to stay and margins in the sector are unlikely to reach historic levels, which leads us to remain cautious on the sector”.
Other analysts on blue-chip supermarket
Proactive Investors meanwhile quoted Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, as commenting that Morrisons, like the other ‘Big Four’ supermarkets, was still facing threat from the rise of German discounters and the threat that the Competition and Markets Authority might okay the tie-up between Sainsbury’s (LON:SBRY) and Asda.
“The group may have sighed with relief on news the Sainsbury/Asda merger has run into trouble, but the possibility remains that someone else could snap up Asda, and that would put another helping of competition back on the table,” Lund-Yates pointed out.