One FTSE 100 stock I wouldn't touch with a bargepole

News that J Sainsbury is to slash a further 2,000 jobs from its workforce as it tries to fight back against Germany's discounters has exacerbated my already bearish take on another FTSE 100-quoted grocery giant, WM Morrison Supermarkets(LSE: MRW).

Sainsbury's declared on Tuesday that it was ramping up its streamlining initiatives in a move than underlines the frantic need for the established chains to boost margins in an environment of rising costs and intensifying competition.

I plan to look at Morrisons a little later, but right now I want to discuss estate agency Foxtons Group (LSE: FOXT), another frightful stock I would sell today.

Fox on the run

In yet another chilling trading update Foxtons advised on Wednesday that revenues clocked in at £35.1m between July and September, down 6.4% year-on-year. For the nine months ending September, turnover dropped to £93.7m from £106.3m in the same 2016 period.

In what it described as "challenging conditions in the London property market," sales revenues dropped 16.3% in the third quarter to £10.3m, while lettings revenues dipped 1.8% to £22.5m.

And a string of releases on the state of the housing market suggest things aren't about to get any easier for Foxtons. Rightmove announced this week that home values in London fell 2.5% year-on-year in October, while a report compiled by Acadata and LSL Property Services revealed a 2.7% slide in the capital's property values in September, the biggest annual fall since 2009.

Reflecting current trading troubles, City analysts expect Foxtons to endure a 51% earnings slump in 2017.

Yet I do not believe the possibility of further heavy annual reversals, in the face of worsening economic and political strife in Britain, is reflected in the estate agency's valuations.

The company sports a forward P/E ratio of 27.7 times, leaving plenty of room for extra share price weakness should news flow continue to disappoint (Foxtons has seen its market value erode by 25% since the start of 2017 alone).

I reckon investors should steer well clear of the property play right now.

Chain of fools

As I mentioned earlier, the sales outlook for the likes of Morrisons is also less-than-compelling right now given that the fragmentation of the British grocery sector is still intensifying.

With cut-price chains Aldi and Lidl still embarking on their massive store expansion programmes, latest figures from industry expert Kantar Worldpanel showed sales at these chains up 13.4% and 16% respectively in the 12 weeks to October 8.

While Morrisons was the best performer of the UK's so-called Big Four supermarkets in the period, with sales rising by 2.8%, this could not prevent the company's market share slipping 0.1% to 10.3%. By comparison Aldi's take swelled to 6.8% while Lidl's rose to 5.2%, both up 0.6% year-on-year.

And Morrisons is likely to face increasing stress as falling real incomes force more and more Britons into the arms of the discounters, a situation that is likely to feed into further bouts of margin-sapping price slashing.

City brokers expect the Bradford chain to report a 14% earnings improvement in the year ending January 2018. But I do not believe a subsequent forward P/E ratio of 19.2 times is indicative of the risk of Morrisons' problems worsening in the years ahead.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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