Time to find out how a few more corporate names performed over the Christmas period. First up food retailer Morrison (MRW), shares in which still remain 85p or so below the three quid a share target I hoped for back HERE…
Christmas trading was solid enough with group like-for-like sales up 3.6% and total sales up 4% ex-fuel and it has kept full year expectations unchanged. So a thumbs up for the value angle expressed by the current 3% odd dividend yield, a mid-single digit free cash flow yield and a high single digit earnings multiple. Of course the 'however' is centred on structural pressures. I thought it was quite insightful that the company also noted that 'Morrisons performed well, sustaining a strong offer and trading the business hard for customers. We were again more competitive...' in the context of a prior announcement that the company 'said it was cutting the prices of 935 products, including tinned tomatoes, cereals, ready meals and multivitamins, by an average of 20 percent'. Well that is not typically the hottest for profitability trends and I also note from some Kantar sector disclosures that Aldi and Lidl remain the food retailers that are picking up the vast majority of new at-the-margin sales. Still not an easy sector. I think the shares are cheap but I might be waiting a bit of time for my three quid share price. I guess if you hold, you keep on holding but it is not a top ten tip for me or anything.
So no great surprise to see Morrison shares down 3% odd...but also no surprise to see Greene King (GNK) shares up 3%. Its observation that after 36 weeks of the financial year, a sales increase of +3.2% due to a strong Christmas period (including record Xmas Day sales of £7.7 million). Well that sounds pretty good and also ahead of the underlying market, however I also note that Pub Partners like-for-like profits over the same longer period was down 1%...and it talks about the importance of cost control in the statement too. This is the flip side of the pubs business in 2018-19, sales can go up...but profits are hard to push up due to all the current issues out there including wage inflation and competition. Back in November, I noted that 'I am still hopeful of six quid here and would buy from both a capital gain and income (5%+ yield) perspective'. This still feels fine, although at today's share price you are only a good day or two away from this level, so the Greene King story for me is almost done and at/above that level I can raise a glass of its finest to a solid trade all things considered.
Finally...I loved up Joules (JOUL) in early December and this one is starting to work out. The latest trading update noted that it is holding its full-year hopes after festive trading period sales rose 11.7%, with e-commerce unsurprisingly especially good. Again - as I noted in my review of the Next (NXT) numbers last week - there are good retailers out there even in a horrible general backdrop, which are potentially interesting investments. Despite a 4% bounce to 250p, I still like this one with its international growth angles and brand resonance with its target audience.
Filed under: Morrison, Greene King, Joules, Neil Woodford, Eagle Eye Solutions, Chris Bailey, Union Jack Oil
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