Back in early January I observed that ‘Morrisons (MRW) is rudely unloved’. Since then the shares have done very little, but a latest trading update is another indication that the stock remains cheap – and that Morrisons is a good place to do your food shopping too. It is certainly far from disappointing to read that first quarter sales are ‘up 5.3% (inc-fuel)’ and it is ‘on track for 2021/22 guidance’, which means ‘profit before tax and exceptionals to be higher than the £431 million we would have achieved for 2020/21 had we not waived the £230 million business rates relief’.
I know you have to debate whether you should use the £3,169 million headline net debt figure from March or the £1,798 million pre-IFRS 16 one, but there is a reason why a couple of months ago a final dividend per share of 5.11p raised the full-year total dividend up 27.1% to 11.15p. In short, as a shareholder you are picking up well above a 5% dividend yield at the moment.
It is even better to read then that Morrison ‘now expects another year of meaningful profit growth in 2022/23’. I think one of the clear reasons for this is that its online sales are currently up 113% year-on-year. Partially this naturally reflects the impact of the COVID-19 challenges but it is also with ‘Morrisons on Amazon are now complementing our supermarkets well’. You bet it is! I know Amazon Prime is not loved by everybody but I think the joint venture between it and Morrison is starting to work really well – and, yes, I am a user. For Morrison it certainly helps in raising its online utilisation. Elsewhere it is still hoping for the conversion of 300 McColl's stores to Morrisons Daily over the next three years, as well as planning for a 100% carbon-neutral direct British farm supply chain by 2030.
So no surprise to read that Chief Executive David Potts, aided by the above and that ‘the nation has a summer of socialising and sport to look forward to’, is optimistic about the future. Morrison shares should be above the 200p level last seen in late 2019. In short, still for me a BUY.
Filed under: Morrison, Powerhouse Energy, Mirriad Advertising, Nightcap, Versarien, TUI, Carnival
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