Morrisons – comment

Post the Q1 numbers, we are not changing our thesis that the underlying business is robust. However, continued high inflation (and required investment in price) will continue to crimp margins in 2023. Stability in customer revenues is returning, albeit revenue is flat. In the three months to June 12, the market share (Kantor) fell from 9.5% to 8.8%, but the YTD is flat. Management had guided for lower EBITDA at the FY point but expects this to reverse in Q2. We will get a better handle on trading in Q2, but we expect free cash flow to improve on working capital performance and lower capex.