Tuesday preview: Morrisons reports fourth quarter trading update

9th Jan 2017 13:01

(ShareCast News) - Morrisons' fourth quarter trading update on Tuesday will be closely scrutinised amid a supermarket price war and worries about a weaker post-Brexit pound pushing import costs higher.The supermarket last week announced it was cutting prices on 800 of its items in an effort to claw back market share.The new price offers, which came into effect last week, were implemented despite a weaker sterling sending the cost of imports higher following the UK's vote to leave the European Union.Bank of America Merrill Lynch on Monday said it was adopting a "very cautious view" on the UK food retail market as it predicts a downturn in the UK economy after Brexit, an increase in food inflation and a shift away from the Big Four supermarkets.The bank downgraded its rating on Morrison to 'underperform' and left its target price at 220p, saying it sees risks skewed to the downside for the grocer's earnings.Merill Lynch said it does not see positive developments in the retail operating margin, albeit new cost-saving initiatives fuelling the price cuts.On the company's deals to supply Amazon customers with groceries in the UK, the bank said: "The two deals signed with Amazon may deliver some incremental profit from FY18 onward, but: 1) it will remain too small, in our view, to move the needle and; 2) it raises questions about Morrison supplying what could be a structural and disruptive competitor in a foreseeable future."Morrisons in November 2016 expanded its deal with Amazon to supply groceries for the one-hour delivery service to selected postcodes in London and Hertfordshire.The bank expects 2017 sales to fall to £16.05bn from £16.12bn the previous year and adjusted earnings before interest, tax, depreciation and amortisation to increase to £826m from £723m. Tuesday 10 January INTERIMS Games Workshop Group INTERIM DIVIDEND PAYMENT DATE D4T4 Solutions INTERNATIONAL ECONOMIC ANNOUNCEMENTS Wholesales Inventories (US) (15:00) Q3 Big Yellow Group EGMS Hellenic Telecom Industries SA ADS AGMS Focusrite TRADING ANNOUNCEMENTS Gocompare.com Group, Tarsus Group, Morrison Supermarkets