Broker Oriel has downgraded Morrisons ahead of the grocer’s interims next Thursday.
Oriel shaved 2% off its forecasts for the current full year and 3% from next – £15m and £25m respectively – despite Morrisons having beaten its expectations so far this year.
Analyst Jonathan Pritchard, who rates the stock a reduce, said shoppers increasingly expect more than “plain vanilla superstore food retailing” and that Morrisons remained behind the pack on such initiatives.
“We continue to believe that the lack of non-food and the ponderous moves into convenience and web-based retailing will ultimately leave Morrisons exposed,” he cautioned.
Oriel had already downgraded Sainsbury’s, but it remained confident about the food sector in general, despite acknowledging weak volumes and tough conditions.
The broker said: “We suspect that, as usual, the majors have not adopted too aggressive a pricing stance during these tough times and profits are not far from consensus forecasts at this stage.”
Oriel pencilled in “not unimpressive” like-for-like growth of 1.5% at Morrisons in the second quarter, compared with 2.5% in the first.