Will You Regret Selling Wm. Morrison Supermarkets?

LONDON -- According to the Met Office, it's been the coldest spring for over 50 years -- since 1962, to be exact. And the fifth coldest since records began, back in 1910.

We've seen some of the obvious causalities already. Yesterday, Kingfisher -- owner of DIY and gardening chain B&Q -- reported profits down 30%, blaming weak consumer confidence and bad weather.

In April, Punch Taverns blamed bad weather for a poor set of half-year results. And at around the same time, bakery chain Greggs blamed the second-wettest year on record for falling sales and profits. Greggs' chief executive Roger Whiteside -- formerly at Punch -- must wonder what has hit him.

And next? You don't have to be Einstein to figure out that fairly soon, we're likely to hear a similar tale of woe from camping, cycling, and car-DIY chain Halfords.

Bad weather ahead
What's to blame for all this bad weather? The jet stream. And looking ahead to the summer, it's already much further south than it should be at this time of year -- just like in the last two dismal years.

In other words, we could be in for another miserable summer. And I reckon that there's a sporting chance that such a summer could adversely impact the oh-so-slow turnround at Wm. Morrison Supermarkets  (LSE: MRW  ) .

As I've written before, it's a share that I'd like to buy, as I reckon the business is undervalued. My worry: it could get even cheaper.

Underperforming
From a share price perspective, Morrison has underperformed the FTSE 100 by almost exactly 25% over the last 12 months, and now trades on a prospective price-earnings ratio (P/E) of 10.7 -- well below the 13.3 P/E of the broader FTSE 100 as a whole.

And, as my colleague David O'Hara has recently observed, that share price is currently getting considerable support from its forecast dividend yield of 4.5%.

Yes, Morrison is finally addressing some of its strategic misjudgements of recent years. It has long been criticised for not offering online sales, for instance. Well, this month we've seen that corrected, with the launch of a tie-up with Ocado.

In convenience stores, too, the business is finally playing catch-up, in a game where the market leaders have a significant head start.

Soggy shoppers
Compared to those market leaders, a prolonged cold, wet summer could show up Morrison's greatest vulnerability: until the Ocado tie-up kicks in, it is a uniquely footfall-driven U.K.-centric grocery retailing business model, dependent on physical shoppers buying physical goods.

No banking and personal finance offerings, no home furnishings catalogues, no stores in far-off sunny Asia, and no "bolt-on" telecommunication packages and other brand extensions.

As such, sales could slump if British shoppers spend summer on the sofa, rather than in the garden with Morrison-bought beer and barbecue products, sitting on Morrison-bought plastic chairs and garden loungers.

So, is it time to sell -- and buy back in later, after the summer's weather has done its worst?

Follow the money
That, of course, is something that only you can decide.

But if you are mulling selling your stake, and are interested in other high‑quality companies with growth opportunities, this exclusive wealth report reviews five particularly attractive blue chips that have been carefully compiled by the Motley Fool's expert stock pickers.

Indeed, all five opportunities offer a mix of robust prospects, illustrious histories, and dependable dividends, and have just been declared by the Motley Fool as "5 Shares You Can Retire On!"

Just click here for the report ‑‑ it's free.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2464342, ~/Articles/ArticleHandler.aspx, 11/28/2014 12:51:45 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement