The scale of the task facing new Morrisons CEO David Potts when he sits at his desk for the first time on Monday was laid bare this week, when the retailer reported a near-£800m annual loss.
The loss for the year to 1 February was its largest for six years and represented a fourfold increase on the previous year’s figures. The market reacted by sending Morrisons down 2.3% to under 200p in early trading, with momentum not helped by chairman Andrew Higginson’s warning: “Last year’s trading environment was tough, and we don’t expect any change this year.”
However, trading momentum improved during the day and Morrisons was trading 1% up at 208.5p by lunchtime on Thursday as the more optimistic-minded saw signs of encouragement in the numbers. Underlying profits before tax fell 52% to £345m, but this was well within the margins of analyst expectations. Furthermore, fourth-quarter trading showed an improving trend (2.6% down against a 6.3% fall in the third quarter).
David Gray, retail analyst at Planet Retail, noted: “Morrisons has posted an improving, if somewhat subdued, like-for-like performance, suggesting recent measures like the price comparison loyalty scheme are beginning to bear fruit.”
Shore Capital, which has a buy recommendation on the shares, gave a cautious welcome to the progress: “Mr Potts’ imminent arrival makes these results a stepping stone between two regimes and, as such, it may be the interim results in September that may provide more colour.”
Bernstein’s Bruno Monteyne remains far less convinced, despite noting Morrisons will benefit next year from easier comparatives due to the inclusion of non-underlying costs in this year’s figures, such as the disposal of Kiddicare. “In our view, the continued negative like for likes and a lack of a clear place in the UK retail market means substantial investment is required.”
Morrisons’ online partner, Ocado, saw its shares rise 4% during the week to Thursday, reaching 376.1p after posting a 15.2% first quarter sales boost to £252m for the 12 weeks to 22 February.
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