Morrisons still a 'sell' amid job cuts, says Shore Capital

18th Jun 2014 10:16

Shore Capital has repeated its 'sell' rating for supermarket group Wm Morrison after the recent announcement that 2,600 store managers are likely to lose their jobs.The job cuts come as part of plans to re-organise and simplify its management structure. Having trialled the new structure on a small scale, the retail chain has decided to roll out the plan across the group. Shore said it will take time for the new strategy to show if it's working, so it does "not foresee a reverse in trading momentum as measured by the publicly aired market share data"."The announcement [of jobs cuts] is confirmation of 'chatter' that was flowing through the British supermarket segment in recent times and, as such, the news is not a great surprise to us or we expect the market," said analysts Clive Black and Darren Shirley."As is often the case with such announcements, senior management pledges that the changes are likely to lead to an improvement in customer service; we will see whether this is the case and also whether in-store morale and standards can be maintained through what is a demonstrably challenging and difficult time for all concerned."As for the shares, Black and Shirley said the stock has now fallen through the "support" price of its net asset value at 208p, "suggesting that credit and real estate markets have less faith in the cash flows and so carrying values of its freehold estate". They said that the "safety net" has now been breached.The stock was down 0.6% at 191.38p by 10:46.BC