LONDON (SHARECAST) - Nomura has downgraded its rating for supermarket group Morrisons after analysing the recent Kantar grocery survey.
The broker said that it has drawn two key conclusions from the survey: "(1) We think Tesco's reset is beginning to work with progressively improving volume data over the past six months; and (2) Morrisons' volume trends are below those of its peers."
According to the survey, Morrisons' volume growth lagged behind its counterparts by around 4% at the last data point.
"We recognise MRW’s ability to preserve profitability, having faced volume headwinds from both Asda’s Netto conversions (abating) and TSCO’s reset (ongoing), and expect resilient H1 interims (September 6th). However, MRW’s survey volume trend proves the tipping point for us to revise our recommendation to 'neutral' (from 'buy')," the broker said.
Nomura maintained its 'buy' rating for Tesco (target price of 430p) and stayed 'neutral' on Sainsbury (target price of 300p).
"The UK grocery market remains subdued, particularly after a damp summer. Nonetheless, volumes are no longer trending negatively and industry supply has begun to moderate," Nomura said.