Broker snap: Morrison's underperformance expected to continue

8th Nov 2012 16:39

Seymour Pierce has reiterated its 'reduce' rating for supermarket group Morrison and a weakened trading performance in the third quarter, saying that the forecast risk is 'still on the downside'.Sales for the 13 weeks to the end of October were up 0.2% with like-for-like (LFL) sales excluding VAT and petrol down 2.1%. This was broadly in line with analysts' estimates and confirmed recent market share data that the company's performance had deteriorated, Seymour said."The recent share price underperformance had anticipated a weak update and indeed, Morrisons' Q3 update was disappointing. This has driven another downgrade," the broker said."We expect underperformance to continue into next year as changes to its marketing and promotional strategy will take time for consumers to become aware of and may not be enough to differentiate Morrison from the rest of the pack."Seymour said that Morrison's outlook statement - that it anticipated a "broadly in line" full-year performance - usually implies a small downgraded to consensus. As such, it is cutting its own full-year profit before tax estimate by 3% from £910m to £890m, which is based on second-half LFL sales declining by 1.3% on the whole.Shares were down 1.5% at 263.5 before the close of trade today.BC