London, Sept 5 - Wm Morrison Supermarkets is set to post a 19 percent rise in first-half underlying profit on Thursday and confirm it is taking market share from bigger rivals as cash-strapped shoppers flock to its lower price stores.
Britain's fourth-biggest supermarket group is also expected to confirm plans to return 500 million pounds ($879 million) to shareholders both this fiscal year and the next, despite having only bought about 10 percent of this year's tranche so far. Analysts say the buyback could help underpin Morrison's shares as it faces more demanding sales comparatives in the second half of the year.
Morrison is set to report profit before tax and one-off items of 294 million pounds ($517 million) for the 26 weeks to Aug. 3, according to the average forecast of 8 analysts polled by Reuters. Estimates range from 284 million to 305 million.
Like-for-like sales excluding fuel, a key industry measure, are forecast to climb 7.2 percent in the second quarter, boosted by higher food prices as grocers pass on the rising cost of commodities such as meat and dairy products.
Estimates range from 6.5 percent to 8 percent, and compare with 7 percent growth in the first quarter.
Industry data from TNS and Nielsen show Morrison continues to outperform the overall grocery market, although perhaps not by as much as earlier in the year.
The group is, after several integration problems, feeling the benefit of its purchase of rival Safeway in 2004 as well as its "Refresh" campaign to revamp stores and its image as a lower-priced alternative to some of its rivals.
Cash-strapped Britons are trading down to cheaper stores amid higher fuel and food costs, as well as sliding house prices.
Analysts are looking for signs of whether Morrison will step up promotional spending as it comes up against the second half's tougher sales comparatives, after having a quieter first half than some of its rivals.
They are also keen for an update on whether Morrison will try to buy stores from The Co-Operative Group, which is expected to put some on the market following its purchase of Somerfield.
Bradford-based Morrison runs around 375 stores and has a market share of about 11 percent, trailing J. Sainsbury, Wal-Mart-owned Asda and market leader Tesco.
Its shares have outperformed the DJ Stoxx European retail index by 26 percent over the past year and trade at about 16.6 times forecast earnings, in line with Sainsbury, but above Tesco on 13.4, according to Reuters data.
At 1125 GMT, the stock was down 1.7 percent at 274.5 pence, valuing the firm at about 7.6 billion pounds.