WM Morrison Supermarkets PLC (MRW): Uncertain Outlook Overshadows Impressive Like-For-Like Sales Growth
After climbing more than 20% over the past year, shares of WM Morrison Supermarkets PLC (LON:MRW) fell sharply following the release of full-year results, which included the first annual like-for-like sales growth for the supermarket chain in five years. The company shares dropped over 5% in early-trading this Thursday as Morrison indicated that lower sterling levels can affect imported food prices. In addition the food-retailer expects depreciation and pension costs on a higher side. For the full-year, like-for-like (LFL) transactions were up 4% and LFL sales grew 1.7% (2.5% in the most recent quarter), helping MRW boost revenue by 1.2% to £16.3 billion, despite the company shutting down eight stores as per its Fix, Rebuild and Grow strategy. Profits grew a lot faster with underlying (excludes one-offs) operating profits up 8.3% to £432 million as margin improved slightly, prompting MRW to raise final dividend by 8.6% to 3.85p per share. “I am confident that strong execution will drive sustained dividend growth and improving returns for Morrisons shareholders”, said MRW chairman Andrew Higginson. MRW crossed its three-year £1 billion savings target by realising £393 million cost savings in 2016. While it’s looking for further opportunities to save costs, MRW achieved £18 million incremental profit out of its medium term target of £50–£100 million in wholesale, services, interest and online. An indication of further benefits in this direction was the net debt reduction of £552 million that would bring down interest-costs going forward. “But, it’s only one year. Our turnaround has just started, and we have more plans and important work ahead. If we keep improving the customer shopping trip, I am confident that Morrisons will continue to grow”, said CEO David Potts.