Wm Morrison Increases Dividend and Buys Back Shares in an Attempt to Boost EPS


After releasing its sales data, Wm Morrison Supermarkets discussed its financial results for fiscal 2012 (ending February 3, 2013)  in more detail, supporting the thesis of operating margin declines. The company will most likely have to increase its sales by sacrificing its gross margins or go through a deleverage of expenses from negative like-for-like sales of 2.1% for the year.

Wm Morrison faced a strategic decision at the beginning of the year, which involved keeping its profit margin by not matching the prices with competitors, which probably impacted the comps decrease. Nevertheless, the company got to keep flat its administrative expenses as a percent of sales, at 1.9%, in comparison with the last year. The gross margin rate went down to 6.7%, down by 23 basis points on the year, which primarily affected the operating margin drop of 30 basis points. The EBIT margin fell to 5.2%, which was in line with the previous expectations.

To address its issues, Wm Morrison increased its dividend by 10% to 11.8 pence and repurchased around 159 million shares, aiming to report a 2% increase in diluted EPS to 26.57 pence. The company posted EPS of 27.3 pence, excluding property disposal, multichannel and convenience development costs, as well as IAS19 pension interest.

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