Morrisons warns of price rises and shortages as half-year profits fall 43%

Business

Morrisons has warned it expects “industry-wide” price rises ahead and revealed some product shortages while reporting half-year results showing a 43% slump in profits.

The UK’s fourth-largest supermarket chain by market share said the price hikes were to be “driven by sustained recent commodity price increases and freight inflation, and the current shortage of HGV drivers”.

However, it expected to help “mitigate” the increase in costs, signalling that the continuing price war in the sector will limit higher bills at tills as the major chains battle the challenge posed by discounters such as Aldi and Lidl.

Please use Chrome browser for a more accessible video player

Iceland’s chilling warning on consumer prices

The company, currently at the centre of a takeover battle, said it was already seeing a squeeze in some products including water, carbonated drinks, juice, crisps, pet food and wine.

Chief executive David Potts said the lorry driver shortage was such that its own drivers were picking up goods from delivery companies on occasions.

Nevertheless, he expressed confidence over its most important season ahead, declaring: “Christmas is going to be biblical”.

Morrisons revealed the extent of its supply struggles as profits over the first half of its financial year to 1 August were damaged by further COVID-19 costs totalling £41m.

More from Business

It reported £80m of lost earnings from its cafes, fuel and food-to-go as pandemic measures bit and demand remained constrained.

The firm’s bottom line statutory profit before tax figure came in at £82m, compared with £145m in the same six-month period last year, as a result.

Total sales rose by almost 4% to £9.1bn during the period aided by a surge in online sales during the pandemic and its wholesale business.

Morrisons said that online like-for-like sales growth, which includes its Amazon partnership, was up 48% but overall like-for like sales growth, excluding fuel, declined slightly by 0.3% as competition in the sector continued to bite.

Shopping trolleys are parked at a Morrisons supermarket in south London
Image:
Morrisons saw store sales come under pressure from tough competition

The company told investors that profit guidance for the full 2021-22 year had been maintained but there would be no interim dividend given the takeover situation.

Morrisons had revealed on Wednesday that it was in talks with the two US private equity suitors and the Takeover Panel, which governs takeover deals, regarding an auction procedure.

However, it may not be needed as the Morrisons board revealed it was to recommend a £7bn bid from Clayton, Dubilier & Rice (CD&R) after rejecting an earlier offer of £5.5bn.

CD&R’s latest offer is worth 285 pence per Morrisons share.

A rival consortium led by Softbank-owned Fortress Investment Group could still trump that bid.

Fortress had earlier offered £6.7bn.

Morrisons shares were trading at almost 293p on Thursday – indicating that investors were clinging to hope of a counter bid.

But John Moore, senior investment manager at Brewin Dolphin, said: “The Morrisons board recommending the 285p per share offer from CD&R should bring a conclusion to the bidding war for the supermarket, which has highlighted the appetite from private equity and trade investors for comparatively cheap UK companies over the last 12 months.”

Products You May Like

Articles You May Like

Apple Vision Pro to Be Available in China in 2024, CEO Tim Cook Confirms
Trump Is So Broke That He’s Recycling Old Campaign Ads
Joe Biden Mocks Trump For Awarding Himself Golf Trophies
“We Love You” – Carly Pearce Dedicates “Every Little Thing” To Riley Strain At Missouri Show
Chrysler parent Stellantis laying off 400 salaried U.S. workers