Morrisons Suffers Significant Fall In Sales; Serious Work Ahead Says CEO

Namnews, 30th June 2022

Morrisons has revealed that its like-for-like sales slid 6.4% during its first-quarter period to 1 May, with the group blaming a “very challenging” trading environment as inflationary pressures grow and consumer confidence weakens.

The UK’s fourth-largest grocer, which is now owned by private equity firm CD&R, stated that its performance had improved towards the end of the quarter, helped by good performance over Mother’s Day and Easter. However, the figures confirm analysts’ recent concerns that Morrisons is struggling to compete with the discounters and Tesco as cash-strapped consumers seek cheaper grocery options. Earlier this week, it was suggested that Aldi could soon overtake Morrisons in market share terms.

Morrisons’ total revenue, including fuel, rose 2.6% to £4.6bn over the 13-week period, primarily due to a recovery of fuel sales, which increased 54%. The group stated that this was partly offset by a decline in supermarket like-for-likes as more normal trading conditions returned to the grocery market, post-Covid.

Adjusted EBITDA rose 14.5% to £71m, reflecting a recovery in areas impacted by the pandemic as well as cost savings.

Whilst the figures show Morrisons is lagging behind its main rivals, its Chief Executive David Potts called its performance “resilient”. He pointed out the quarter compared to a period of Covid restrictions last year when travel and hospitality were both severely limited, boosting grocery sales. Retail like-for-like sales were also impacted by the discounts it offered to NHS staff, teachers, farmers and Blue Light cardholders last year.

In April, Morrisons launched one of its biggest price cut campaigns, involving over 500 products to help customers facing the rising cost of living. Potts said: “These are serious times and there is further serious work ahead of us as we help customers and colleagues face into the highest inflation for 40 years.”

Earlier this month, the supermarket’s £7bn takeover by CD&R was given the green light by the Competition and Markets Authority (CMA) after the new owner agreed to sell 87 of its petrol stations.

“Now that the CMA process has concluded, we are looking forward to working more closely with CD&R as we continue to drive the key pillars of our strategy, focused on being a broader, stronger, popular and accessible business,” Potts concluded.

Analysts have suggested that the heavy debt pile picked up from the takeover could give Morrisons less flexibility to absorb increasing costs and restrict its ability to compete on price with its cheaper rivals.