WM Morrison Supermarkets share price plummets, company expects profit decline

The shares of WM Morrison Supermarkets Plc, which is the fourth-largest grocer by market share in the U.K., were reported to have made their biggest decline since 2008. The company made a statement, revealing it expects its profit to decrease in 2014. The retailer also said that it plans to reduce prices.

The Chief Executive Officer of the company – Dalton Philips commented for the Financial Times: “The perception has changed, and there is a new price norm. Were all losing to the big discounter. This is not cyclical, this is structural.”

WM Morrison Supermarkets Plc made a statement forecasting an underlying pretax profit estimated to between 325 (542 million dollars) and 375 million pounds in the current fiscal year. The companys profit for the last fiscal year decreased to 785 million pounds, which is the second decline in a row. The Finance Director of Morrison said that margins “will come down but will be very strong”.

One of the analysts working for Exane BNP Paribas – Mr. Andrew Gwynn, commented for Bloomberg: “The negative is that it means profit is loosely half what the market was expecting and theres no obvious message on how they recover from that. The positive is that theyre really prepared to try and invest to fix the problems.”

The company has recently been put under pressure by its investors, who have been trying to persuade it to improve the return from its property portfolio, estimated to 9 billion pounds. According to people with knowledge of the matter, the real estate, which has been found attractive by private-equity funds, is expected to be sold by the company during the three years that are yet to come. The company pledged to sell real estate worth 1 billion pounds and keep 80% under its direct control. WM Morrison Supermarkets Plc also hopes to raise about 500 million pounds in 2014.

Darren Shirley, who is an analyst working for Shore Capital said for Bloomberg: “Todays announcement should reduce the likelihood of a bid. Property is only valuable if its sustained by the cash flow of the food retail business.”

WM Morrison Supermarkets Plc fell by 9.23% by 12:43 GMT in London to 211.50 pence, marking a one-year change of -22.34%. The grocer is valued at 5.1 billion pounds. According to the Financial Times, the 19 analysts offering 12-month price targets for WM Morrison Supermarkets Plc have a median target of 230.00 pence, with a high estimate of 330.00 pence and a low estimate of 190.00 pence. The median estimate represents a -1.29% decrease from the previous close of GBX 233.00.