Morrisons maintains its momentum as consumers tuck in at Christmas

“The battle between the bulls and the bears continues at Morrisons but it is the shareholders rather than the short-sellers who are raising a glass to the grocer’s Christmas trading statement,” says Russ Mould, AJ Bell Investment Director.

“A 2.8% increase in like-for-like sales, excluding fuel, in the 10 weeks to 7 January represented the ninth straight period of growth and an acceleration on the prior three-month period, as Morrisons focused on providing quality at the right price in its stores, showed solid growth online and benefited from faster growth in wholesale.

Source: Company accounts

“Management left full-year earnings expectations unchanged, which will reassure many after the carnage seen in some retailers’ share prices this month and also underpin analysts’ forecasts of a steady recovery in the dividend payment. A yield of around 3.0% for 2019 may start to bring the stock nearer to the radar of income-hunters once more.

“Bears are clearly yet to be convinced, however. According to the website www.shorttracker.co.uk, Morrisons is the seventh-most shorted stock in the UK, with some 11.5% of its shares on loan according to publicly declared positions.

“The 12 funds who have taken positions against it will point out the latest data from consultants Kantar Worldpanel which show how Morrisons’ 2.1% sales growth in the 12 weeks to 31 December lagged a 3.1% increase at Tesco, let alone the 16.8% gain recorded by both Aldi and Lidl.

“As a result, the Kantar numbers show that Morrisons still lost market share in 2017, from 10.9% in January to 10.7% at the end of the year and boss David Potts and team still have work to do.

“The good news for fans of the company is that its healthy finances mean they have time on their side as there is solid asset backing here: the market cap is £5.5 billion, net debt is just £932 million and the company has £7.2 billion in property and assets on its balance sheet.”

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