Wm. Morrison Supermarkets plc Falls On Poor Sales

Recent price cuts at Wm. Morrison Supermarkets plc (LON: MRW) will “take time” to have an effect.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 8 May, 2014 9:43 am BST

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Shares in Morrisons (LSE: MRW) lost 5p to 186p after the market opened for business this morning, after the Bradford-based grocer reported a 7.1% fall in quarterly like-for-like sales.

Total sales, excluding fuel, fell 4.2% to compared to 2.8% last year. This was worse than analysts had expected.

Morrisons said its underlying profit forecast for the full year — in the range of £325m-£375m — remains unchanged.

Morrisons unveiled 1,200 price cuts last week to emphasise the firm’s credentials as a “value-led grocer”. The price cuts include minced beef (£2.49 to £1.99) and ripened tomatoes (£1.69 to 99p).

The chief executive, Dalton Philips, is bullish on the strategy:

“The plans we set out at our results in March are on track. The reaction of our customers to the 1,200 “I’m Cheaper” price cuts we announced last week has been very positive. Although it will take time for their full impact to be felt, we are confident that these meaningful and permanent reductions in our prices will enable our clear points of difference to resonate strongly with consumers.”

Analysts expect Morrisons will pay a full year dividend of 13.6p in 2015. The dividend is covered 1.06 times by earnings and, at today’s share price, investors can secure a yield of 7.3%.

Of course, the decision to ‘buy’ — based on those metrics, today’s results and the wider prospects for the grocery sector — remains your decision.