| Valuation method | Value, £ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | n/a | n/a |
| Intrinsic value (DCF) | n/a | |
| Graham-Dodd Method | 0.32 | -100 |
| Graham Formula | 0.34 | -100 |
Wm Morrison Supermarkets PLC (LSE: MRW) is one of the UK's leading grocery retailers, operating under the Morrisons brand. Founded in 1899 and headquartered in Bradford, the company runs a network of 492 supermarkets, 50 daily convenience stores, and 335 petrol filling stations. Morrisons differentiates itself through a vertically integrated supply chain, owning food production facilities for fresh meat, seafood, bakery, and dairy products, ensuring quality and cost efficiency. The company serves customers through in-store and online grocery retailing, while also offering ancillary services such as insurance, property development, and pharmaceutical licensing. As part of the Consumer Defensive sector, Morrisons benefits from stable demand in the grocery industry, though it faces intense competition from discounters and premium supermarkets alike. The company's focus on British-sourced products and in-store manufacturing provides a unique selling proposition in the UK market.
Morrisons presents a mixed investment case. On the positive side, its vertically integrated supply chain provides cost advantages and quality control, while its strong brand recognition and extensive store network ensure steady revenue streams. The company's beta of 0.46 suggests lower volatility compared to the broader market, making it a relatively defensive play. However, the UK grocery sector is highly competitive, with pressure from discounters like Aldi and Lidl squeezing margins. Morrisons' net income of £96 million on £17.6 billion revenue reflects these margin pressures. The substantial total debt of £3.4 billion is a concern, though it's partially offset by £240 million in cash. The dividend yield appears attractive, but investors should weigh this against the company's high capital expenditures (-£538 million) and the challenging competitive landscape.
Morrisons occupies a middle ground in the UK grocery market, positioned between premium players like Waitrose and hard discounters like Aldi. Its key competitive advantage lies in its vertical integration – unlike most competitors, Morrisons owns much of its supply chain, including abattoirs, bakeries, and fish processing facilities. This allows for better quality control, faster product turnaround, and margin protection. The company's focus on British-sourced products resonates with domestic consumers and provides differentiation from competitors relying on global supply chains. However, Morrisons has been slower than rivals in developing its online grocery capabilities and convenience store footprint, areas where Tesco and Sainsbury's have invested heavily. The company's large supermarket format also leaves it more exposed to the shift toward local, convenience shopping. While Morrisons' manufacturing capabilities are unique among UK grocers, this model requires significant capital expenditure, which can weigh on profitability during periods of weak consumer spending. The company's market position is further challenged by the rapid expansion of German discounters, which have successfully eroded the market share of traditional supermarkets.