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Can half-year results boost Morrisons’ share price?

Can half-year results boost Morrisons’ share price?

While Morrisons’ share price initially went south as the coronavirus pandemic hit these shores, its trading activity went in the opposite direction, as consumers flocked to supermarkets to bulk buy and generally stock up.

The UK’s fourth-biggest supermarket released its Q1 figures in May, revealing a 5.7% hike in like-for-like sales (excluding fuel) in the 14 weeks though to the middle of May – increasing at a rate of 10.8% between weeks 12 and 14 compared with the same time a year earlier, once the UK lockdown was introduced. As a result of the demand surge, Morrisons recruited 25,000 additional staff across its stores, supply chain and online operations.

Morrisons share price rebounds from 4-year low

Morrisons’ share price fell by 15% from its early March price of 185.30p to 157.55p in mid-March – its lowest level in over four years, as the coronavirus pandemic took hold and the UK lockdown was enforced. However, the shares have generally been travelling in an upward trajectory since then, albeit with some blips along the way, hovering between 190p and 200p for most of August and into September.

Sales rise as Morrisons outperforms rivals

Kantar’s supermarket sector analysis, released in July, showed UK grocery sales soared almost 17% in the three-month period to 12 July. And Morrisons managed to outperform its ‘big four’ competitors – Tesco, Sainsbury’s, Morrisons and Asda – after sales rose 17.4%. By way of comparison, Asda saw sales rise 11%, which was the slowest of the UK’s supermarket giants.

The findings provide a fillip when compared with the previous year, when Morrisons lost 2.7% of its market share in the three months to mid-August, according to Kantar. At the time, Morrisons fared worse than its big four rivals. Meanwhile, the deep-discount stores Lidl and Aldi continued to gain further market share and Ocado also performed strongly, with consumers already navigating to online shopping in increasing numbers.

Online partnerships boost

Alongside its online platform in conjunction with Ocado and click-and-collect service from over 250 stores, Morrisons partnered with Deliveroo early in lockdown, enabling core items to be delivered from 130 shops inside half-an-hour.
Morrisons has taken further bold steps into the digital sphere via its partnership with Amazon. On a trial basis, Amazon Prime members in Leeds now have access to Morrisons’ full product range, plus same-day delivery from Amazon.
CEO David Potts commented: "It will give more and more customers the option of receiving Morrisons’ groceries straight to their doorstep, including freshly prepared products,"

What next for Morrisons’ share price?

Morningstar’s quantitative equity research report, available in our trading platform, estimates the Morrisons share price is undervalued by around 13%. Morningstar has placed a 4-star undervalued rating on Morrisons, giving it a fair value estimate of 221p.

Morrisons has been notably proactive recently, launching digital partnerships with Deliveroo and Amazon to add to an agreement with Ocado, as the supermarket strives to get ahead of the curve and meet the changing demands of online shoppers. Will Morrisons’ six-month interim results demonstrate that its strategy is working?

Morrisons’ half-year results are due to be released at 7am on Thursday 10 September.

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