The Investment Column: William Morrison

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The Independent Online
The Investment Column: William Morrison

THE FOOD retail sector is not a comfortable place these days, what with a Competition Commission investigation on prices and the Wal-Mart/Asda threat. But they don't seem to be too bothered round at William Morrison. The Bradford-based group has stuck resolutely to its no-frills approach investing resources in lower prices rather than fancy gimmicks such as loyalty cards. And it has proved highly successful.

Half-year profits were up by 12 per cent to pounds 76.2m and like-for-like sales are up by nearly 10 per cent including petrol sales. That's well ahead of the industry average, around 4 per cent. Market share has meanwhile risen by a full percentage point to 4.7 per cent.

It wasn't always like this. At the start of the decade Morrisons was treading water with ordinary sales growth and a problem with store expansion. Now it has a superstore pipeline second to none and a trading philosophy in tune with the times.

But there are problems. One is that, as a regional player, Morrisons is unlikely to be of interest to a merger partner. The other is that it is right in the firing line of the Wal-Mart-owned Asda, which itself has a Yorkshire stronghold and a programme to cut prices.

All of which indicates that the shares, up 8.5p to 160.5p yesterday, might be near their peak. On Morgan Stanley's full- year profit forecast of pounds 191m, the stock trades on a forward p/e of 21. This may mean all the good news is already in the price. While Morrisons is a fine company, it could be time to take profits.