Broker snap: Panmure cuts Morrison target price after festive disappointment

9th Jan 2014 10:52

Panmure Gordon has trimmed its target price for Morrison and reiterated its 'sell' rating after a 'very disappointing Christmas' by the UK grocer.Total sales excluding fuel and VAT were 1.9% lower than last year in the six weeks to January 5th. On a like-for-like (LFL) basis, sales were down 5.6%. Panmure had expected a fall of just 2%."Morrison's trading problems appear to have mounted in a quarter when it had been flagging it expected a return to LFL sales growth," said analysts Graham Jones and Damian McNeela.Morrison labelled the key Christmas period as "very challenging" amid a slowdown in market growth, and said that difficult conditions were "intensified" by the increasing importance of online and convenience channels, where it is currently under-represented.The analysts said: "This has been a tough trading period for all retailers, but the weakness of these results clearly reveals a fundamental weakness in Morrison's business model - extending to more we believe than just a lack of exposure to convenience and online, although clearly this is the main issue."They added: "After cutting our forecasts by 3% at the start of this week, we cut forecasts by a further 3% today."Morrison said it now expects that full-year underlying profit to be towards the bottom of the range of current market expectations of £783m and £853m for the 12 months to February 3rd. Panmure has cut its pre-tax profit estimate from £810m to £785m and reduced its earnings per share forecast from 23.9p to 23.1p.The stock was down 6.44% at 237.82p by 11:00 on Thursday.BC