Staple Retail equity research

Explore the most viewed and latest equity research and media content for companies within the Staple Retail sector. Stocks in this sector provide goods and services in the food wholesale and drug retail industries.

Staple Retail equity research

Explore the most viewed and latest equity research and media content for companies within the Staple Retail sector. Stocks in this sector provide goods and services in the food wholesale and drug retail industries.

  • 11 Apr 19

Strong FY results

Tesco posted a strong performance in Q4 and FY18/19. Key takeaways were a reduction in the lfl decline in Asia, robust sales momentum in the UK, and a strong surge in profitability across all geographies. Retail FCF was a bit softer due to WCR outflow, but it is a non-structural issue. Next stock price trigger could be the Capital Markets Day, scheduled on 18 June 2019. We will increase our estimates, along with a possible upgrade in the stock recommendation.

Companies: Tesco
  • 11 Mar 16

Waiting for growth; capital light

The downward trend in sales growth at the beginning of 2015 offset the uptick posted in Q4, despite deflation of 3%. FY 2015 sales were down, impacted by decreasing fuel sales (12.6% to £3.1bn) and same stores sales underperformance (including a positive contribution of 1.0% from the online business), which offset the 0.6% growth from new space. Margins marked a deep decrease compared to 2014, with the underlying operating margin down by 110bp to 1.5%. Net income stood at £222m, compared to £381m adjusted profit in 2014 (net of £1,273m impairment and lease provisions). WM Morrison proposed a final dividend of 3.5p per share, i.e. FY total dividend at 5p (vs. 13.7p a year earlier), perfectly in line with our estimations.

Companies: WM Morrison Supermarkets
  • 10 Aug 16

Reaching new terms with Ocado

Morrisons agrees new terms with Ocado that will enable it to reach customers nationwide. Under the new terms, Morrisons will be released from a profit-sharing agreement (between ¼ and ½) of earnings. Also, it would not share fees for research and development (£4m). The deal states that Morrisons rents 30% of Ocado’s new warehouse. According to management, the new terms would lift the company’s profit by £50-100m per year in the mid-term. Ocado will still be prohibited from serving Tesco, Sainsbury, Asda and the German discounters. Wm Morrison’s share climbed by 1.86% yesterday, boosting its performance over the last week to 6.92%.

Companies: WM Morrison Supermarkets
  • 03 Nov 16

Still positive but lower growth pace

Sales (excluding fuel) increased on a lfl basis for the fourth consecutive quarter. Fuel inflation prices led to a lfl sales rise of 3.4%. However, the smaller store portfolio following the disposal of M Local (140 stores) affected its total sales, capping the rise to just 1.1%. A strong Halloween period, when revenues soared by 20% yoy, has lifted Morrisons’ Q3 results. The online business contributed 0.9% lfl.

Companies: WM Morrison Supermarkets
  • 11 Jan 17

Strongest lfl growth in seven years

In the nine weeks to 1 January, lfl retail sales impressed with 2.9% growth. Including fuel, total sales were up by 4.0% on a lfl basis. This came after improving lfl transaction growth of 5.2% yoy, soaking up the smaller basket’s impact (-5.3% yoy). Morrisons’ achievement is its best for seven years and higher than the previous Christmas period, by 2.0%. Morrisons has increased its profitability guidance: underlying operating profit will be in the range of £330-340m. According to management, FY16/17 net debt is expected to be £1.2bn (in line with our model).

Companies: WM Morrison Supermarkets
  • 10 Mar 17

Turnaround plan starts lifting profitability

Morrisons announced FY 16/17 sales at £16,317m, slightly higher than our expectations. Margins rose leading to a £305m net result, i.e. a net margin of 1.8% vs. 1.3%, a year ago. Morrisons succeeded in reducing its net debt despite a stronger capex, mainly thanks to improving cash flows from operations. The proposed dividend is about 5.43p per share vs. 5p a year ago (5.16p in our model). Regarding the outlook, Morrisons reiterated caution about Brexit’s impact on depreciation and pension costs (£272m surplus in the wake of the triennial valuation). Management remains confident of a £50-100m incremental profit as a medium-term target (vs. £18m this year) thanks to further cost savings (beyond £1bn) and the strong broader business (Ocado and Amazon). Net debt should continue to fall (less than £1bn by the end of 2017/18) due to improving working capital control.

Companies: WM Morrison Supermarkets
  • 05 May 17

Morrisons performed well, again

In the 13 weeks to 30 April, group lfl sales excluding fuel, were up by 3.4%, comprising contributions from Retail of 3.0% and Wholesale of 0.4%. Group LFL including fuel was up 6.3%. Total sales excluding fuel were up 2.8% after the impact of last year’s store closures. Including fuel, the growth came in at 5.8%.

Companies: WM Morrison Supermarkets
  • 13 Dec 17

Decent Q3 results; competitive headwinds cloud future performance

Morrisons clocked good lfl growth in Q3. Its recent tie-up with McColls is margin enhancing/return accretive. However, the retailer is likely to face higher competitive pressure especially from German discounters and Asda. We have slashed profit margins as the grocer is estimated to burn more cash to preserve market share (lost 20bp recently) in forecast years. We have also applied a discount in the peer valuation to capture competitive headwinds and weaker investor sentiment. Our recommendation is reset downwards at Add.

Companies: WM Morrison Supermarkets
  • 24 May 18

Q1 driven by Wholesale business

Morrisons reported strong Q1 FY18/19 results. Despite sequential moderation in retail business lfl growth, the incremental contribution from McColl contract (wholesale business) boosted the group’s top-line. The company is healthier today with lower leverage and a stronger balance sheet. However, the proposed Asda-Sainsbury merger might put more pressure on the retailer in the mid/long-term. Our stock recommendation remains unchanged.

Companies: WM Morrison Supermarkets
  • 06 Nov 18

Q3 below consensus; apprehensions over retail growth slowdown

The Q3 results were in line with our estimates but below consensus (due to retail business). The biggest investor worry is softer growth in transaction volume and apprehensions about Morrison’s Christmas performance. Although we continue to believe in management’s capability, it looks as if there will be a tough fight ahead in the forthcoming holiday season, as the competitors are also well-equipped and will not leave any stone unturned to grab the biggest pie. We have tweaked our estimates but no change in stock recommendation.

Companies: WM Morrison Supermarkets
  • 09 Jan 19

Weak November impacts Q4 performance

Despite softer consumer demand in November, Morrison performed better during the Christmas period. Although the company has slashed prices of c.1,000 core products to remain competitive / improve customer perception, other players are also likely to follow suit. We expect increased pressure on the company’s profitability in the forecast years. We will be reducing earnings but maintain the stock recommendation.

Companies: WM Morrison Supermarkets
  • 14 Mar 19

No surprises in the preliminary results

The FY18 performance was in line with the street’s expectations. The key highlights were an increase in the special dividend and healthy free cash flows. However, lower capex in FY18 is attributable to the delayed timing of some investments and management expects higher cash outflow in FY19. We believe the company will remain healthy and well-equipped to sustain this performance (positive lfl and preservation of profit margins). No changes to our stock recommendation.

Companies: WM Morrison Supermarkets

Latest Content

Tesco

Strong FY results

Tesco posted a strong performance in Q4 and FY18/19. Key takeaways were a reduction in the lfl decline in Asia, robust sales momentum in the UK, and a strong surge in profitability across all geographies. Retail FCF was a bit softer due to WCR outflow, but it is a non-structural issue. Next stock price trigger could be the Capital Markets Day, scheduled on 18 June 2019. We will increase our estimates, along with a possible upgrade in the stock recommendation.

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  • 11 Apr 19
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Casino Guichard Perrachon

Moody's downgrades Casino

Moody’s has downgraded Casino’s credit rating from Ba1 negative outlook to Ba3 negative outlook. Subsequently, the company has released a note stating that Moody’s analysis is based on Casino’s gross debt at the end of 2018, which does not take into account either the asset disposal plan or the future reduction in bond debt. The French retailer has also specified that this development will have no impact on the availability or cost of the group’s financial resources – Casino in France has €5.0bn in liquidity, composed of a gross cash position of €2.1bn and confirmed credit lines of €2.9bn with an average maturity of 2.4 years. On a positive note, Moody’s has stated that the group is well positioned in convenience formats and online activities, and that it has the potential to generate new sources of revenues, particularly through its Greenyellow and 3W relevanC subsidiaries. In addition, Moody’s has also highlighted the group’s limited and decreasing exposure to the declining hypermarket format. Our view The concerns regarding high gross debt / financial expenses vs French free cash flows were also flagged by the market (the stock price slumped c.15% after the FY18 results last month). We continue to believe that the French gross debt (in turn, the financial expenses) will start coming down from H2 18. Moreover, the company should also witness cash inflows from non-core asset disposals (€1.0bn over the next 12 months), the majority of which should be used to reduce leverage further. Lastly, the incremental benefit from the 2019-21 strategy should also aid in improving the French free cash flows. For more details, please refer to our detailed report dated 25 March 2019. Although Casino’s share price has recovered slightly over the past few days, it might come under pressure today / in the short term. However, we maintain our positive stance and stock recommendation.

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  • 03 Apr 19
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Sonae SGPS

Humming along nicely

The holding company’s achievements in 2018 marginally exceeded our expectations revenue-wise, while its bottom line was largely more fuelled by Sonae Sierra’s capital gains and Sonae RP’s sale and leaseback transactions.

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  • 25 Mar 19
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Casino Guichard Perrachon

Facing short-term hiccups, but moving in the right direction

Despite clocking healthy sales and profitability in FY18, the French FCF generation looks inadequate at first glance. However, we continue to have faith in management – Casino has successfully improved its health over the past few quarters and this issue is also addressable. The 2019-21 strategy is one more step in the right direction. While the stock price might remain under pressure in the short term, it’s an attractive entry point for patient investors – with a time horizon of more than six months.

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  • 25 Mar 19
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Ocado Group

No surprises in Q1

The Q1 performance is encouraging considering management’s success in limiting the impact on sales due to the fire at the Andover facility. Some makeshift arrangements to mitigate the supply disruptions is also likely in our opinion. The initial assessment of the fire incident does not highlight any grave concerns regarding the viability of Ocado’s business model. Management also considers the initial results from the trial of Ocado Zoom (one hour delivery service) as encouraging. No change to our stock recommendation.

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  • 19 Mar 19
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WM Morrison Supermarkets

No surprises in the preliminary results

The FY18 performance was in line with the street’s expectations. The key highlights were an increase in the special dividend and healthy free cash flows. However, lower capex in FY18 is attributable to the delayed timing of some investments and management expects higher cash outflow in FY19. We believe the company will remain healthy and well-equipped to sustain this performance (positive lfl and preservation of profit margins). No changes to our stock recommendation.

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  • 14 Mar 19
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Greggs

Greggs - Brand transformation rolls out cash

Greggs’ substantial progress with the brand transformation, backed by savvy use of social media, helped to deliver robust FY18 results, in spite of weather extremes, and an outstanding start to FY19. Consequently we have upgraded our forecasts three times since late November. The company is highly cash generative and likely to distribute part of the substantial cash balance (FY19e: £92.9m) with the H119 dividend.

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  • 14 Mar 19
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Carrefour

FY18 concludes; moving in the right direction

The year has ended on a positive note. While management has achieved the FY18 profit guidance, the cost savings target (under the performance turnaround plan) has also been increased to €2.8bn (vs €2.0bn earlier). We believe management will continue to invest in prices / promotions to enhance the competitiveness. The market share should also stabilise in the mid-term. We continue to believe in the capability of management.

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  • 05 Mar 19
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Jeronimo Martins SGPS

Good end to FY18

There were no surprises in FY18 results. In FY19, we believe the company will be able to clock positive lfl and profitability is also likely to remain stable. Management’s strategy to open smaller format stores in less densely populated areas is a step in the right direction. No change to our stock recommendation.

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  • 01 Mar 19
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Ocado Group

New supply partner in the UK

Ocado and M&S have announced the formation of a JV today. According to the deal, M&S will take a 50% stake in Ocado’s retail business for a total consideration of up to £750m, including a deferred payment of up to £187.5m, plus interest. The JV will start trading as Ocado.com from September 2020 at the latest (this is when Ocado’s existing food supply contract with Waitrose will expire) and will stock M&S’s own-brand products. The transaction is expected to be completed in Q3 FY19. M&S plans to finance this deal by conducting a Rights Issue (raising up to £600m) and by cutting its dividend pay-out to shareholders by 40%.

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  • 27 Feb 19
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