Equity roundup: Aston Martin and Morrison
Morrison’s lean Christmas
It was a lean Christmas at
the Morrison household but the grocer managed to stick to profit forecasts and
is upbeat about the year ahead. Group like-for-like sales excluding fuel were
down 1.7% in the 22 weeks to Jan 5th, with retail responsible for all of this
decline whilst wholesale was flat. Total sales fell 1.8% over the period –
although it’s interesting that it’s chosen not provide more specifics on the performance over the
key Christmas period.
Q3 was also soft with group LFL –1.2%, with wholesale
contributing –0.1 percentage point to the decline and retail adding –1.1%. Management described trading
conditions as exceptionally challenging. Aldi’s numbers support the case that
consumers tightened their belts over the festive period a little more than
decent cost control means 2019/20 profit before tax and one-off items is still
expected to be within the current range of analysts’ forecasts.
So, first out the gate among the big four listed grocers and
Morrisons passes the test – trading was tough and for sure they are leaking
market share to the discounters, whilst the election in December certainly had
But MRW hit forecasts and shares have bounced 3.5% as a result
following a bit of selling on Monday in the wake of the Aldi numbers. The read
across has been felt in the sector with TSCO up a touch, SBRY also doing well.
Marks and Spencer shares have jumped 4% as Berenberg raised the stock to buy
Kantar data has also crossed the wires and confirm it was a tough old
patch for supermarkets. Tesco sales -1.5%, SBRY -0.7%, Asda -2.2%, MRW -2.9%.
Discounters continue to gain ground.
Nielsen numbers meanwhile indicate grocers endured the worst
Christmas period since 2014. Again Sainsbury’s looks to have held up better
with sales -0.4% over the 12 weeks to Dec 28th, while Tesco -0.9%
and Morrisons -.2.5%.
So far it seems Christmas was a bit lean for supermarkets and there
was not the hoped-for big post-election splurge, but perhaps it was not quite
as bad as feared.
Aston Martin: Stroll on
Profits warnings never
come alone – they usually come along like buses in batches. True to form,
following a warning last summer and sailing pretty close to one in November,
Aston Martin is warning profits will be between £130m and £140m, about half the
£247m last year. Shares dropped 13% to £4.53.
The numbers are pretty horrid,
albeit retail sales rose 12% (heavy discounting when buyers can see multiple
models on the forecourt is impossible to avoid).
- Core wholesales
declined 7% year-on-year to 5,809
- Year-end cash balance
was £107m, giving expected net debt and leverage ranges of £875m-£885m and
That net debt figure is a major concern. The only good news
is the DBX order book has risen to 1,800 which means Aston can unlock an
additional $100m in 2022 notes. This is a drop in the ocean though and for sure
Aston needs to raise cash in some way. The bond market looks unpalatable but
even an equity raise could prove tricky. The rationale to go private is
impossible to resist – the brand still has the cache to make it appealing. Stroll on.