Wm Morrison Supermarkets (LSE: MRW) has lagged behindits FTSE 100 competitors, Tesco and J Sainsbury, in getting its online shopping launched and in opening up multi-format stores and when the pricewars started, that didnt leave it in a very good position.
Its share price remainedbuoyantlonger than Tescos after the latters dreadful 2011 Christmas season, but since September 2013 its down 40% to 182p, after the sector malaise caught up with it and forecasts were slashed. Last years poor Christmas trading didnt help, with like-for-like sales down 5.6% in the six weeks to 5 January excluding fuel (down 7.1% including fuel), as the company belatedly recognised the accelerating importance of the online and convenience channels.
Since then weve seen EPS forecasts slashed, and theres now a 50% drop forecast to just 12.6p per share, but willthis years festive season help turn the tide? Morrisons is due to spill the beans on Tuesday 13January, and all the signs so far suggest its been the best retail Christmas for some years.
Some forecasts suggest annual retail volumes will reach a record of more than 340bn, but that has come at the expense of lowermargins with more shops than ever having startedthis years sales ahead ofChristmas, so its mixed news on theprofitability front.
Morrisons could do with a decent final quarter, after reporting a 6.3% like-for-like sales fall (down 8% including fuel) in its third quarter to 2 November, but there doesnt seem to beany expectation of a quick recovery just yet after the company told us that it will take time for our initiatives to fully benefit our sales performance.
Having said that, year-end forecasts for Morrisons have been beefed up a little of late, with predictedEPSup from12.4p a month ago. The shares are still on a P/E of over 14, but with an 11% EPS recovery indicatedfor the year ending January 2016, that would drop to 13.
The dividend picture is unusual, with Morrisons apparentlysticking to its planto offera yield of 6.9% this year, which would equal earnings and a drop next year would still yield 6% while being covered only1.3 times. Whether thats a wise policy remains to be seen, and Christmas and the next two quarters could prove crucial for those wanting the income.
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