Morrisons' third-quarter results: What the analysts say

Here we round-up analysts’ reaction:

“Morrisons has made some decisive and difficult moves under David Potts, most notably ending its flawed convenience misadventure; closing several underperforming supermarkets; scaling back the Match & More loyalty programme to remove the margin dilutive discounter price-matching; and dialling down some of the merchandising and ranging excesses inherited from the previous regime. With a leaner range and sharper promotional structure, Morrisons is stabilising its core business, although a lot will rest on how these improvements are communicated to shoppers. The business has a strong narrative to share on fresh, quality, value, service and provenance – now is the time to trumpet this differentiation. Early signs regarding the chain’s Christmas advertising are encouraging in this regard.” - Bryan Roberts, Kantar Retail’s senior vice-president and knowledge officer, EMEA

–

”Falling like-for-likes and total sales worse than consensus will disappoint the market and is in line with our view that an undifferentiated retail offer will underperform the UK market. Morrisons has not yet found a trading and retail proposition that will differentiate it in the market place. However, it has a strong balance sheet, which gives it more time than others to find a new identity. We are negatively inclined towards this stock but on a one-year basis believe there will be enough positive catalysts for it to perform in line with the market” - Bruno Monteyne, Bernstein

–

The 4% share price rocket yesterday implied that today’s Q3 update would produce some fireworks, but the -2.6% LFL is a bit of a damp squib Morrisons blames 2.2% food price deflation and reduced vouchering (claimed to have knocked sales by 2.4%). But the plan to “stabilise trading” still seems a bit remote, even though the new chief executive Dave Potts says, rather lamely, “we are improving the shopping trip and serving our customers better”. The comment that “as previously guided, we expect that underlying profit before tax will be higher in the second half of 2015/16 than the first” is also rather unhelpful. - Nick Bubb, independent analyst

–

If Morrisons is to make up for its first half shortfall, it will need to pull out all the stops in Q4 because Q3 was another quarter of lacklustre sales. We have seen nothing yet to understand how they are going to drive more footfall into their stores in this most important of all quarters. It feels like Morrisons has almost scaled back its marketing at a time when it should have been investing in big value messages. Match & More is like Clubcard’s younger and less effective brother. Christmas is coming and probably too quickly for David Potts and his team, yet the Morrisons full-year profit forecast remains unchanged. They must know something we don’t.” - Phil Dorrell, partner, Retail Remedy retail consultants

–

“While some progress has been made over the past six to nine months, we highlight that the new senior team has had relatively limited time together. In particular, in the key roles of commercial director and retail (stores) director, Darren Blackhurst and Gary Mills have not yet been in the business for six months. We expect this new senior management resource will create a basis for Morrison to improve at greater pace and extent in forthcoming months, while freeing up time for David Potts and Trevor Strain to broaden their reach and impact upon the business. Some of that freed up time is perhaps reflected in the creative decision to explore a re-entry into the convenience market through the partnership with Motor Fuel Group, a capital and operating light model” - Shore Capital