Morrison Signals Start of Turnaround as Grocer Seeks Revivalby
Company expects to exceed targets, though sees no quick fix
Future dividends to be twice covered by earnings per share
Wm Morrison Supermarkets Plc said it’s on track for improved future profit as the smallest of the U.K.’s main supermarkets seeks to rebound from years of decline.
The grocer has identified opportunities to add 50 million pounds ($71 million) to 100 million pounds to underlying pretax profit over the medium term, it said in a statement Thursday. Morrison also expects to beat targets for working capital and property disposals. Still, there will be no quick fix, it said.
“The turnaround will take time and will continue to require sustained investment in the proposition,” Morrison said in the statement. The company also reported 2015 profit in the middle of its own forecast range.
Morrison shares were little changed at 201.6 pence in early London trading, having gained about 36 percent so far this year. The stock has been buoyed by the initiatives of Chief Executive Officer David Potts, who in his first year at the helm has reformed the management team, sold the unprofitable convenience-store business and agreed to supply Amazon.com Inc.’s fledgling U.K. grocery operation.
“It remains relatively early days in Morrisons’ long journey to return once again to being a great British retailer,” Darren Shirley, an analyst at Shore Capital, said in a note. “There is so much more to do.”
Morrison has been among the hardest hit of Britain’s supermarkets by the intrusion of discounters Aldi and Lidl, who have rapidly gained 10 percent of U.K. grocery spending, according to researcher Kantar Worldpanel. More recently, the company has had to contend with the revival efforts of market leader Tesco Plc.
The grocer proposed a final dividend of 3.5 pence a share, matching a Bloomberg forecast. Future dividends will be twice covered by earnings per share, the company said.