Broker snap: Jefferies recommends 'buy' for Morrison

9th May 2013 11:33

Analysts at Jefferies International recommended a 'buy' rating and target price of 310p for Morrison Supermarket after the UK grocer posted first quarter sales that beat market forecasts.Morrison was a top faller on the FTSE 100 Thursday as the supermarket chain revealed a 1.8% drop in like-for-like sales, excluding fuel, in the 13 weeks to May 5th. It exceeded predictions for a 2.0% decline and was up on the previous quarter's 4.1% decline. The company said its marketing strategy and investments in opening more convenience stores helped to improve results. The group is also on track to deliver its first online food operation in January 2014."Notwithstanding the lack of scale in convenience/online food, we see scope for further progress as the group continues to improve on marketing/trading execution (particularly once we cycle a further weakening in comps at the end of the summer)," Jefferies remarked."This should further support Morrison at a time when it still trades at an ample sector discount."The prospects of further improvement in like-for-like performance will likely be the key driver for shares in the immediate term, the broker added. It said the new online store should also unlock new levels of productivity savings.RD