Morrison’s H1 performance was below our estimates. The Q2 lfl sales came in at 3.7%, led by the weakness in the retail segment. Adjusted PBT slumped 37.1% during the first half. While we do not see any structural issues, the retailer will face headwinds like price inflation and supply chain distribution in the near term. Valuation-wise, the stock is no longer cheap. The winner of the auction might end up having to compromise on the IRR.
Companies: Wm Morrison Supermarkets plc
WM Morrison’s board has accepted the acquisition bid from a trio of Softbank-owned Fortress, Canadian pension fund CPPIB and a unit of Koch Industries. The deal is priced at 252p per share plus a cash dividend of 2p per share, bringing the total equity value at £6.3bn. We expect counter-bids in the coming weeks and the final price is likely to reset higher.
The US private equity group Clayton, Dubilier & Rice has expressed interest in acquiring WM Morrison. The board has rejected the offer price of 230p per share, stating that it substantially undervalues the firm. Reportedly, the bidder is planning to sweeten the bid. We would not be surprised if the target firm receives a counter-bid also, from the likes of Amazon. Nonetheless, we expect the M&A action to continue in the (undervalued) European food retail sector.
Morrisons has reported a decent Q1 FY2022 sales out-turn in our view against comparatives that became progressively more difficult; we anticipate negative Q2 Retail like-for-like (LFL) sales versus c12% in FY2021. So, Q1 FY2022 Group ex-fuel, ex-VAT LFL sales grew by 2.7% (SC estimate; 0.8%) comprising Retail LFL sales up by 1.6% (SC; 0.0%) and Wholesale contributing 1.1% (SC 0.8%) (21% in channel); online sales rose by 113%. In light of this outcome, we retain our FY2022 CPTP estimate of £455m
WM Morrison has announced FY20/21 preliminary results in line with the street’s estimates. Although the revenue and adjusted operating profit were in line, FCF slumped significantly, on the back of lower operating profit, the temporary decline in fuel sales and working capital headwinds. We continue to see Morrison as a healthy business and believe that the FY21/22 outlook is achievable. We remain positive on the stock’s valuation.
Morrisons will announce FY2021 preliminary results on the 11th March. Given January market data and the Prime Minister's forthcoming unlocking news, we set out our expectations for the forthcoming results. In brief, Morrisons guided for FY2021 PTP within a range of £420-440m, a midpoint of c£430m (excl. rates). We expect the Group to come within this range, looking at external trading data for January. With still subdued demand for fuel, positive working capital will take year-end net debt highe
WM Morrison’s Q3 and Christmas trading update was broadly in line with our estimates. All business formats contributed in sustaining the positive momentum. While management’s guidance of underlying PBT (420-440m in FY20/21) is slightly ahead of our expectations, the company’s sales growth (excluding fuel) is likely to be muted in the forecast years. We maintain our positive stance on the stock’s valuation.
Wm Morrison Supermarkets (Morrisons) has reported strong Retail trading in the 22- weeks (22W) to the 3rd January 2021; 8.1% Group ex-fuel like-for-like (LFL) sales growth, elevated activity fuelled, of course, by the impact from the pandemic (last 3W LFL sales grew by 9.3%). Whilst so, Covid-19 has had a major cost impact, £280m now estimated for FY2021 (+£10m on prior guidance) whilst business rates (c£230m) will now be paid and the Group has incurred the hit to operating profits from closed c
Looking Ahead At The Next Week
Wm Morrison Supermarkets will be updating the market on Q3 and nine-week (9W) trading over the festive period on Tuesday the 5th January, a week or so earlier than its listed FTSE 100 peers. This trading period, therefore, covers Q3 and a fair chunk of Q4 FY2021. Ahead of the update, and noting that there are a few very important trading days to come as Britain seeks to celebrate Christmas in the best way that it can in the pandemic, we felt that it may be useful to set out our broad expectation
Morrisons has reported a distinctive H1 FY2021 with strong revenue growth but with extraordinary Covid related costs, lower PTP (£148m versus Shore Capital estimate of £142m). The Group has not wasted this crisis, however, going onto materially enhance its brand reputation through its actions, revolutionise its online capabilities, including the strengthening of its relations with Amazon, building its capability and sharpening its value proposition. We are pleased to see the declaration of an in
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MCLS has a leading position in the expanding convenience sector, and a clear growth strategy. Following strong uplifts at recent stores converted to a Morrisons Daily, it has raised £33m to accelerate and expand the scope of the conversion programme. It plans to convert 350 stores (vs 300 target previously) by Nov’22 (a year earlier than the previous plan) and increase the investment in each to c£90k from c£60k to capture a bigger profit opportunity. Sales uplifts range from 20-45% (avg. 20-25%)
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According to French news reports, Carrefour has turned down an acquisition offer from Auchan – 70% in cash (at €21.5 per share) and the remaining 30% in shares. Reportedly, there were differences over the complex deal structure plus valuation. While it may look like a lost opportunity for Carrefour, we reiterate that such a marriage was risky from a strategic perspective (even if the financial deal was much more attractive). This development also reconfirms the attractiveness of Carrefour’s valu
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A brief but positive RNS reach this morning. It highlights membership growth surpassing 30k and finalisation of the new supply chain facility. Both developments are further illustration of delivery against IPO plans. Particularly pleasing is the membership metric, which with the busier Xmas period still to come, is ahead of our full year working assumption. We hold off making forecast changes but clearly post today’s membership news, the upside risk has strengthened. We use this update to also r
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Walgreens Boots Alliance delivered a strong quarter result surpassing Wall Street expectations across all business segments, reflecting a strong operational performance. The strategic investments that the management are making should enable Walgreens' retail pharmacy business to develop coordinated care models that will assist their customers and patients in successfully managing chronic diseases and achieve better health outcomes. This will also help the company stay competitive against rival,
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Carrefour’s Q3 sales performance was a mixed bag. While the LatAm business produced a robust show (despite a tough comparable base), the French operations were mired by some hiccups in the hypermarket format (temporary introduction of the health pass). The retailer will host a Digital Day on 9 November 2021, which could be a key catalyst if management is able to present a convincing strategy to boost the e-com performance (sales plus new income streams). Buy recommendation maintained.