Bosses say Morrisons will beat its £430m profit target this year despite falling sales
Morrisons will beat its £430m profit target this year despite falling sales, bosses said yesterday.
The supermarket group said results for the six months to the start of August were ‘very solid’ but warned that supply issues and inflationary pressure continue to dog the sector.
The figures will be well received by the two private equity bidders, Clayton, Dubilier & Rice (CD&R) and Fortress, as they prepare for an auction showdown to end a four-month takeover battle.
Pushing back: The supermarket group said results for the six months to the start of August were ‘very solid’
CD&R are the front-runners with a recommended offer of 285p-per-share, or £7billion, which beat the 270p offer put forward by Fortress last month.
In its half-year figures, Morrisons faced tough comparisons with the booming sales of the first lockdown. The company reported a drop in like-for-like sales of 0.3 per cent, excluding fuel, in the six months to August 1, compared to 2020.
Profit before tax fell 43.4 per cent to £82m, due to £41m of Covid-19 costs – mostly from staff absence during the ‘pingdemic’ – and £80m of lost profits in cafes, fuel and takeaway food.
Online sales continued to soar, rising 48 per cent over the half, compared to 2020, meaning it has more than tripled its online business during the pandemic.
‘Morrisons on Amazon’ has expanded to 60 towns and cities, covering 60 per cent of the population, and now accounts for 10 per cent of sales in the majority of Morrisons stores. Deliveroo home delivery has grown to 328 stores, up from 183.
The group’s wholesale business grew 18.1pc over the half, compared to 2020, and is ‘making good money’.
The supermarket also expects to convert 350 McColl’s stores to Morrisons Daily by the end of November 2022, up from a target of 300 by the end of 2023, as part of its expansion into convenience retail.
Bosses said Morrisons will exceed £431m profit this year, which is the figure it would have reached in the year to the end of February if it had not handed back coronavirus business rates relief.
Amidst growing concerns about rising prices in the UK, chief executive David Potts also warned of ‘industry-wide’ inflation. Prices have risen in the last three months, following several quarters of deflation, due to increased commodity costs, a ten-fold rise of shipping and because firms are being forced to pay lorry drivers more, he said.
There is particular pressure on the price of products which use wheat and beef, but consumers can expect low price rises for the time being because the grocery market is highly competitive.
Morrisons – founded in 1899 in Bradford – also continues to face shortages of water, fizzy drinks, wine, crisps and pet food due to the lorry driver shortage.
It is trying to mitigate the problem by delivering straight from suppliers to its supermarkets, missing out distribution centres, and stacking up to twice as many goods per lorry