Morrisons slump in ‘horrible year’ under private equity ownership

Morrisons profits slump in a ‘horrible first year’ under private equity ownership

Morrisons’ profits have tumbled in a ‘horrible first year’ under private equity ownership.

The supermarket group, which was taken over by US buyout giant Clayton, Dubilier & Rice (CD&R) for £7billion at the end of 2021, reported a 15 per cent slide in profits to £828million for 2022.

The results rounded off a bleak period after it lost its position as one of the Big Four grocers in the UK, having been overtaken by Aldi.

Struggles: Morrisons The slump in fortunes is a setback for former Tesco boss and industry guru Sir Terry Leahy (pictured) who spearheaded the takeover

The slump in fortunes is a setback for former Tesco boss and industry guru Sir Terry Leahy who now works for CD&R and spearheaded the takeover of Morrisons.

Shore Capital analyst Clive Black commented: ‘It has been a pretty horrible first year for Morrisons under new ownership.’

Like-for-like sales fell 4.2 per cent last year but said business improved as the year went on. In the three weeks to Christmas Day, sales were up 2.5 per cent on a year earlier.

Boss David Potts said Morrisons has been wooing disenchanted shoppers back with fresh price cuts in recent weeks. The revival over Christmas was proof of customers ‘starting to vote with their feet’.

‘In a very difficult period for consumers and businesses alike, we are continuing to do everything we can to keep prices down for customers and to support our colleagues,’ he said.

Morrisons’ ownership of its supply chain meant it was hit harder by ‘racing inflation’ than rivals last year, affecting its ability to offer affordable prices, Potts admitted.

Since then, it has ‘turned up the gas on price cuts’, most recently slashing the cost of 820 items to woo shoppers back.

Levels of customers’ pessimism, which it tracks twice a week, ‘abated for a little while’ over Christmas, as shoppers looked forward to a Christmas free of Covid concerns and enjoyed the World Cup.

Morrisons saved McColls from the verge of collapse last year but has had to wait to clear regulatory hurdles before moving forward with its plans for the convenience store chain.

The Competition and Markets Authority ‘really put a spanner in the works’ by taking a while to approve the deal, forcing Morrisons to sell 28 McColls stores, Shore Capital’s Black added.

‘But the debt Morrisons now has is a big negative change from where it was and is a big constraint on management’s ability to drive the business,’ said Black.