ShoreCap upgrades Morrisons to 'buy' after new CEO appointment

25th Feb 2015 09:23

Shore Capital has welcomed the appointment of David Potts as the new chief executive officer (CEO) of Morrisons, saying his experience and expertise may bring about a much-needed turnaround in the supermarket's sales performance, and share price.The broker upgraded the UK grocer from 'hold' to 'buy', saying that the shares could outperform the sector in the near term, "and, with good execution, thereafter".Potts, who replaces Dalton Phillips who was pushed out earlier this month, is the former head of Asian operations at Tesco, where he also worked as UK retail director and manager of its Irish business. He will join the board next month."Crucially, to our minds, Mr. Potts knows and understands Morrison's recently appointed Chairman, Andrew Higginson, and the interim CEO, Trevor Strain, very well too, having worked with them at Tesco for many years," Shore Capital said."We believe that David Potts' expertise on the UK market made him the prime candidate for the role and it is not a surprise to our minds that he has been appointed. We believe that he will bring focus and pace to Morrison's, a business where in tandem with Messrs Higginson and Strain we view the current strategy as being correct but the execution in particular needs correction."The broker said there could be a "wholesale evolution" of the non-executive team at Morrisons, who have overseen some "dreadful" decision-making in the past.With the company's weak performance over the last few years presenting some favourable comparatives this year, ShoreCap said that "the insights and emphasis that a very fit and sharp-eyed Mr. Potts will bring should create a firmer basis for an improvement in sales".The stock was up 1.7% at 195p by 10:16.