Profits at Morrisons have slumped as subdued consumer sentiment led to a decline in sales and “unprecedented” inflationary pressures hit the supermarket’s in-house manufacturing operations.
CEO David Potts warned the cost of living crisis was starting to change customer shopping patterns, but said Morrisons was doing everything it could to keep prices down for shoppers.
The Q3 results follow a number of setbacks for Morrisons since its £7bn takeover by PE firm Clayton Dubilier & Rice last year. Yesterday, the chain revealed COO Trevor Strain was leaving the business after serving on the board for almost a decade. The move came after Aldi surpassed Morrisons as the UK’s fourth-biggest supermarket earlier this month.
Revenues at Morrisons in the 13 weeks ended 31 July totalled £4.7bn, including fuel – a 4.5% year-on-year rise.
However, excluding income generated at the petrol pumps, like-for-like sales for the quarter declined 3.1%, with total revenues for the financial year so far down 4.9% on a like-for-like basis to £13.9bn.
Morrisons said on a three-year basis, excluding fuel, its sales were ahead of pre-pandemic levels by 4.8%.
Adjusted EBITDA in Q3 fell 50% year on year to £177m, which Morrisons blamed on “a number of temporary and transitional factors”, some of which the retailer expected to reverse in its final quarter.
Morrisons added it had experienced “unprecedented” inflationary pressures in its food manufacturing operations.
“As a foodmaker we feel the effects of inflation earlier than other retailers, but conversely are able to recover more quickly when inflation falls,” the group said. “The business exited the quarter in a stronger position, with good momentum, and we anticipate this continuing into Q4.”
The supermarket highlighted a continued programme of price investment initiatives to support customers through the cost of living crisis, with one of its biggest-ever price cut campaigns introduced in the second quarter and a ‘Summer Collector’ scheme in Q3. And, earlier this week, the chain introduced another price cut programme across 150 of its most popular lines, with a fuel promotion to kick off tomorrow giving motorists 5p a litre off with a £40 spend in store.
“It’s clear that the cost of living crisis is starting to change customer shopping patterns in many ways,” Potts said.
“The speed, scale and severity of cost and energy price increases, exacerbated by the terrible war in Ukraine, had significant impacts through the quarter, but the market is still growing and the energy price guarantee will ease pressure on consumers.
“We are doing everything we can to keep prices down for customers.”
Potts also pointed to “exciting plans” for McColl’s to grow Morrisons’ c-store offering and footprint. The CMA last week signalled it would accept remedies offered by the group to allay the watchdog’s competition concerns following the distressed takeover of McColl’s.
Earlier this month, Morrisons also outlined plans to open thousands of Morrisons Daily stores.
“We are also improving our digital capabilities and investing strongly in our My Morrisons card and app, helping us to incentivise and reward our customers in a more personalised and targeted way,” Potts added.
“I want to thank all Morrisons colleagues for their continued hard work and dedication to helping our customers through an exceptionally difficult period for UK consumers. They continue to be a beacon of compassion and consideration – and the affection and appreciation that our customers have for their work is evident every day.”
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