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Supermarket shares offloaded after Morrisons ‘meltdown’

Supermarket shares offloaded after Morrisons ‘meltdown’
A far worse financial update than expected from Morrisons (MRW.L) – which has gone into ‘meltdown’ according to one analyst – hit all of the FTSE 100 listed supermarket groups, in a retail sell-off that prevented the broader index from lift off.

Reporting on what Morrisons’ chairman Ian Gibson called a ‘disappointing year’ the supermarket group announced a pre-tax loss of £176 million for the year to February, hit by £903 million of exceptional costs relating to store write-downs and the group’s exit from its failed foray into online baby and infant retailer Kiddicare.

The group is predicting profits of just £325 million to £375 million for the next year, as it undertakes a major restructuring to cut costs, ditching £1 billion worth of its property portfolio and dishing out the same amount on improvements.

This self-help programme will ‘provide cold comfort to shareholders’ after today’s ‘truly awful’ outlook statement, said Graham Jones, an analyst at Panmure Gordon. ‘The price war is looking brutal at the moment, but this outlook is significantly worse than expected,’ he added.

John Ibbotson, director of Retail Vision, said Morrisons had ‘gone into meltdown’.

‘The market share of the big four supermarkets is shrinking and none more so than Morrisons with its catastrophic fall in sales and market share,’ said Ibbotson.

More positive analysts reckoned that a 10.7% rise in Morrisons’ final dividend, to 9.2p, would support the shares over the coming months.

Despite that payout, investors appeared to side with the critics, sending Morrisons shares down nearly 8% to 214p.

Sainsbury (SBRY.L) was next in line, off 6.6% to 311p, while Tesco (TSCO.L) dropped 2.7% to 305p. Marks & Spencer (MKS.L) was lumped in with the supermarkets, down 1.2% to 467p.

Share sell-off on pause, but gold in demand

The retail slump prevented the FTSE 100 from making gains. The index was flat at 6,624, at least offering investors a pause from the sell-off that has seen blue chip shares fall for the past four trading days.

Despite the break in equity selling, money was still flowing into perceived safe havens. Gold continued to rise, up 0.5% to $1,372 an ounce, while the Japanese yen rose 0.2% to 102.53 against the US dollar.

The recent market angst was triggered by worries about the state of China’s economy – and subsequently demand for goods around the world – after weekend reports showing exports sank 18% in February.

Investors remain uncertain about events in Ukraine. Russia has tightened its control over Crimea as intentional leaders continue in their attempts to convince president Vladimir Putin to pull back from the region. The latest press reports say Russian leaders are refusing all negotiations with Ukraine.

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