Morrisons Full-Year Results – What The Analysts Said

By Steve Wynne-Jones
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Morrisons Full-Year Results – What The Analysts Said

British retailer Morrisons has posted an 8.6% increase in like-for-like sales in its 2020/21 financial year, however profit before tax more than halved due to additional COVID-19 related costs.

In a statement, chief executive David Potts said, "We must now look forward with hope towards better times for all, and we're confident we can take our strong momentum into the new year, targeting profit growth and significantly lower net debt during 2021/22."

Here's how leading industry analysts viewed its performance.

Clive Black, Shore Capital

"We believe that operationally, Morrisons has had an amazingly good year. The moving parts outlined in its preliminary results for 2021 were unfathomable this time last year. Hence, to come near our pre-existing PTP forecast, excluding rates, is a great achievement. That said, the COVID costs meant that we had to forego our previously anticipated 6.0p special distribution albeit we warmly welcome the Board’s declaration of a rise in the ordinary payout.

"There remains much uncertainty and so it is not wise to forecast a return to a special distribution roster just yet, noting that several options revolve around FCF deployment in Morrisons’ Capital Allocation Framework. That said, we are very pleased to see the expectation of rising ex-rates PTP, which may lead to market upgrades and the closing of some short positions, whilst considerable deleveraging will be key to future options around shareholder benefits.


"Morrisons emerges in very good shape for the future with brand enhancement, asset impairment write-backs and a structurally improved online capability. Hence, with improved sector economics, its shareholders have every reason to have a bit more of a spring in their step on a stock that has been out of favour."

Thomas Brereton, GlobalData

"Like many of its rivals, Morrisons has been heavily focused on growing its online offer to match the channel shift of groceries throughout the year, resulting in online sales tripling. And, while GlobalData estimates Morrisons’ retail online penetration to sit below the other Big Four grocers, claims that online capacity has now increased fivefold on last year demonstrates that Morrisons considers its multichannel expansion far from over, and we expect to see stronger growth than competitors in the upcoming year.

“Given its watertight position in the grocery market, Morrisons should now be focused on how it can improve ranges to appeal to both its own shoppers and new potential wholesale partners. A core pillar of this should be ESG, which GlobalData forecasts to be one of the major themes over the next decade.

"While Morrisons have made some good strides in this e.g. announcing intentions to become the first retailer 100% supplied by net zero carbon emission farms, the grocery market feels like it is still waiting for one of the leading retailers to take sustainability by the horns, and there is no reason Morrisons cannot be that trailblazer, a change that would definitely attract greater interest from wholesale partners looking to sure up their own ESG credentials as it grows in importance amid consumers.”


Russ Mould, AJ Bell

“It’s become very clear that supermarkets haven’t been able to translate a surge in business into higher profits during the pandemic. That’s not a criticism of how they operate, but merely a reflection of the pressures they’ve been under to keep the nation fed. They’ve had to take on significant extra costs related to Covid, all while remaining calm as shoppers expect everything they want to be on the shelves or online grocery slots to be regularly available.

“Morrisons’ results are indicative of this situation. Big sales growth, higher costs, lower profits, and a cash outflow rather than inflow due to paying suppliers promptly, lower fuel sales and having to carry higher stock levels.

“If ever there was a time to judge a company on actions taken to be a responsible business, rather than simply doing anything to drive profit, it is now. Strategically there are some big achievements, including the fact that its partnership with Amazon is certainly going places.

“Morrisons has scored another point by being a supplier to the retail giant’s new physical grocery store in London. This achievement will no doubt fuel speculation that Amazon may one day decide to acquire Morrisons, although Tesco would equally be an obvious bid target if the US giant wanted to quickly gain scale in the country.


“If anything, it feels as if the pandemic has made Morrisons sharpen its focus, with a keen eye on making sure customers are satisfied and the business is run more efficiently. Those actions will pay off in the long run.”

James Anstead, Barclays

"20/21 FCF outflow of £(450)m was primarily due to the lower profit and working capital outflow of £(390)m caused by temporary impacts: lower fuel demand and deflation during lockdown (£347m); investment in higher levels of stock availability (£67m); and the extension of the scheme to pay smaller suppliers immediately (£45m). Morrison saw a FCF outflow of £223m in 2H after an outflow of £227m in 1H – the 2H outflow was inflated by paying a full year’s worth of Business Rates in 2H.

"We think this statement – particularly the minimum profit guidance for 21/22 – will be seen as quite reassuring given the currently uncertain UK market."

© 2021 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.

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