According to Clive Black and Darren Shirley from Shore Capital, trade for Morrisons has been difficult and the supermarket chain has “underperformed” compared to its peers.
Shirley and Black also said that the supermarket chain had felt the impact of Asda’s acquisition of Netto, many of which were were close to Morrisons' stores in northern Englan.
Morrisons is also due to embark upon a series of Fresh Format store modernisations, which Shirley and Black believe will disrupt trade before adding opportunities.
They added: “As an increasing number of stores come through conversion, a positive impact should emerge. Shore Capital harbours concerns that Fresh Formats may be falling between two stools; disenfranchising core value-based customers with a higher category fresh food offer that has, as yet, failed to entice more affluent ones.”
A like-for-like forecast for H1 of this year was predicted to be -1.5%, leading to -2% in the second half of the year. The analysts said: “Such a performance is an especially challenging one for Morrison, to our minds, because it is a retailer with extensive vertical integration — activity that has been expanded over the last
Shore Capital said it would be surprised if it had to change full-year profit expectations for Morrison’s at the interim update. Current pretax profits are predicted to be £422m and Black and Shirley said: “Accordingly, with the ongoing uncertainties, pressures and imponderable items we approach the interim update with a ‘sell’ recommendation on the Morrisons stock.”