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Morrisons shares to reflect new high street pecking order

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How supermarket chain Morrisons shares perform tomorrow after the company releases its earnings, and also how they will perform over the coming weeks, will not only depend on the retail chain’s sales growth but also how it does in relation to its peers. 

As the pecking order on in the highly competitive supermarket sector changes constantly Morrison’s seems set to continue to lose out to budget chains Aldi and Lidl. 

Looking at sales data to February 24 Morrisons managed to increase sales slightly by 0.8%, but although it has not been the worst performer here – Sainsbury has taken that dubious honor with a sales decline of 1% – that is not enough to keep the company in a safe position as both Lidl and Aldi expanded some of their regional sales by over 7%. The overall backdrop remains difficult with consumers holding on tighter to their purse strings as Brexit remains unresolved.

Morrisons also remains at a disadvantage to its bigger rivals as Asda and Sainsbury are currently battling it out for the second and third positions behind market leader Tesco. 

Sainsbury is still struggling to secure its GBP7.3 billion takeover of rival Walmart subsidiary Asda and has failed so far to do much to appease the regulators who are due to publish a final ruling on the deal by the end of April. Meanwhile with its sales sliding the supermarket could lose its second place position to Asda during the current quarter. 

Morrison’s last set of results caused some serious drag on the company shares causing them to dip to 212.5. 

Although the company did show growth in 2018 with revenues rising nearly 6% the decline was partially caused by a nearly 20% decline in its P/E ratio. 

Morrison’s shares have recovered somewhat since December but with the retail sector continuing to face head winds in terms of lower spending, a weaker pound and increased competition, Morrisons shares will face an uphill struggle in the market.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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