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Berenberg predicts 2p special divi from Morrison's but snips target as collapse of Sainsbury-Asda merger reduces growth prospects

Analysts said the FTSE 100 grocer would have been the "key beneficiary" of any store disposals from the merger, which was blocked by regulators in April

Wm Morrison Supermarkets - Berenberg predicts 2p special divi from Morrison's but snips target as collapse of Sainsbury-Asda merger reduces growth prospects

WM Morrison Supermarkets PLC (LON:MRW) is expected to pay investors a 2p special dividend in its first-half results on 12 September according to analysts at Berenberg as they reiterated their ‘buy’ rating.

However, the German bank also trimmed its target price for the FTSE 100 grocer to 230p from 265p on expectations of weak retail growth and the loss of potential new stores from the now-collapsed merger of J Sainsbury PLC (LON:SBRY) and Walmart Inc’s (NYSE:WMT) Asda.

READ: Morrisons revises 2018 profits lower after adopting new accounting rules

In a note on Monday, Berenberg said Morrison’s was expected to have been the “key beneficiary” of store disposals from its two rivals, who had previously promised to offload stores to ease regulatory concerns over competition.

The broker also predicted the firm would see its like-for-like retail sales shrink by 1.1% in its second quarter due to “tough comparatives” last year due to the UK’s heatwave, England’s performance at the World Cup and the Royal Wedding.

However, despite these hurdles, Berenberg said the supermarket had “one of the strongest balance sheets” in the European food retail sector and said they remained “positive” on the stock.

Analysts also said sales growth rates “should normalise” in the second half of the company’s current financial year as the comparatives “eased”.

The market seemed to agree with Berenberg’s upbeat assessment, with Morrison’s shares rising 0.7% to 182.2p in lunchtime trading.

Quick facts: WM Morrison Supermarkets PLC

Price: 182.6 GBX

LSE:MRW
Market: LSE
Market Cap: £4.39 billion
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