More views from UK retail: Morrisons, Tesco's and Greggs

After the different views of Sainsbury's, Domino's Pizza and Mothercare yesterday, a new batch of well-known consumer names unveil their recent trading thoughts today (including the critical Christmas period). 

Morrisons talked about a 'resilient profit outlook despite fall in sales' in their statement but dig below the surface and it was not easy:

'The Christmas period has been very challenging with a slowdown in market growth. Hard pressed consumers elected to economise and managed their budgets very tightly, buying less and shopping selectively'

This manifested itself, over the Christmas period, in a like-for-like sales decline of 5.6% (7.1% including fuel). The company also noted that its lack of convenience exposure and fledgling online orientation meant that it was hurt by the structural shifts in spending too. 

Net result?  Profits will be at the bottom range of expectations.  Maybe that is the 'resilient' profit outlook they talked about in their statement headlines. 

Views on Morrisons?  In my last report I noted three levels to build a position: low 260s for the initial reflecting a x11 EV/ebit valuation and a 5%+ dividend yield, low 240s for single digit EV/ebit and low 220s where book value is.  Now, earnings numbers will move around a little with the above, but these trading levels remain, in my view.

With the shares down 6% in early trading (i.e. below 240p) I have added to my position in line with above.

Tesco's also produced its Christmas update...and noted 'further weakness in the grocery market as a whole continued to impact our performance in the UK'. With strong convenience (25% like-for-likes in the Express convenience store operation) and online offerings (up 14%), the like-for-likes were down 2.4% i.e. not as numerically bad as Morrisons.  This, combined with ok non-UK developments,  has allowed Tesco to say its operating results will be within its previously estimated range. 

Around a month ago - post another trading statement where Tesco reiterated their numbers - I noted that the shares offered capital growth value below a 330p share price.  That remains the case.  My conclusion then, I feel, still stands.  Turning the juggernaut at Tesco's is continuing:

Tesco shares remain in trading mode between the 330s and 370s, albeit a successful turnaround takes them to 400p. 

Early trading saw the shares down around 3% to below 320p.  I have added a few more shares to my holding and will do so again sub 310p and sub 300p. 

Meanwhile, better news at Greggs, best known for its sausage rolls, but now with a broader 'food-to-go' offering. 

In contrast to the downbeat numbers above, Greggs noted that they 'traded well over the important Christmas and New Year period.  For the five week trading period ending 4 January 2014 total sales grew by 4.8 per cent and like-for-like sales grew by 3.1 per cent'.  Positive news. 

The turnaround continues at Greggs and the share has reacted positively today.  The stock did not get down to my hoped for 400p to augment my position further but I remain a holder.