Broker snap: Morrisons' Q3 tough but outlook improving, says Jefferies

7th Nov 2013 10:18

Morrisons is still a 'buy' despite a tough third quarter, according to Jefferies, with the outlook for the rest of the year on an improving trend.Like-for-like (LFL) sales in the third quarter declined by 2.4%, worse than the 2% fall Jefferies estimate and the consensus forecasts for a 1.7% decrease.The broker said that this "reflects a slowdown in industry volumes, continued overhang from a lack of meaningful convenience/.com exposure and the non-repetition of 2012 coupons".Nevertheless, "strategic initiatives" will ensure that the latter challenges are being addressed, Jefferies said, with 100 openings of M-local stores confirmed for next year along with "what looks like a rapid geographic deployment of .com".Meanwhile, the broker expects a much-improved trade performance in the fourth quarter with like-for-like sales forecast to grow 0.8% "as market-share momentum has picked up strongly through the quarter and we assume a less pressured industry volume picture over the key Christmas trading period".However, the broker said that the stock is "likely to remain rangebound through Christmas trading".The stock was down 0.75% at 278.9p by 10:32.BC