More reasons...to own Morrisons shares

I think a lot of the investors here are going by what they see when they walk into their local Morrisons - a good format and lots of customers. That doesn't mean that MRW is going places.

Yes the stores are more busy, but does this transfer to the bottom line?

I have worked in 5 safeway/morrisons stores and have seen stores' financials. The answer is No it doesn't.

Because the products are cheaper, the gross margins are tighter... then you have to consider costs like wages - if you are selling 25% more goods (for the same gross profit because they are 25% cheaper) then you need 25% more staff to pick the stock in the depots, 25% more lorries with 25% more drivers, then 25% more people to fill the shelves and 25% more people on the tills. Also, with few value-added customers remaining you are left with the scum of the earth who wonder around the shop drinking red bull and eating sweets then lobbing the empty packets at the back of the shelves!

Morrisons tries to compete with the big boys on price despite having much less bargaining power, so they end up pinching pennies where the others do not dare... lower wages & no staff discount means the quality of employee is poor (staff turnover the highest in the industry); poor quality ingredients in own brand food mean they lose the price-conscious value-added market that Safeway shared with Sainsburys; buying low-grade produce at short notice because it's cheaper leads to stock loss and customer dissatisfaction at the quality and irratic supply.

They are running up losses and burning assets to hide it. Note todays announcement of 4 MORRISONS-branded stores sold to Somerfield.