Morrisons sales rise as debt-ridden grocer cuts costs
Morrisons has toasted faster sales growth as the private-equity-owned grocer nears £1bn in savings as it races to trim its huge debt pile.
The grocer saw like-for-like sales jump by 3.2 per cent to £1.4bn in the three months to the end of July, as its chief executive attributed this “stronger sales momentum” to the summer’s record temperatures and the World Cup.
Rami Batiéh, who joined Morrisons to lead its turnaround in 2023, said the supermarket’s drastic cost-cutting regime is fuelling a “broad-based improvement” across the group.
The firm made £53m in cost savings in the three-month period, pushing its total cuts up to £995m since it kicked off its cost-cutting drive in March 2023.
Morrisons said these savings are helping the group to cut its net debt and offset “headwinds” caused by the war in Iran, which has pushed up supply costs and dampened consumer confidence.
Batiéh said: “Our stronger sales momentum reflected a broad-based improvement across the business – with our supermarkets, online, convenience, pharmacy and Myton manufacturing businesses all reporting good growth, underlining our progress with our plans to renew and modernise Morrisons.
“Key to this performance is our continued commitment to keeping prices low. The recent launch of our Unbeatables price promise, which guarantees customers won’t find better value on hundreds of essential products at named major supermarkets, has already had a positive impact.”
Last month, the grocer promised to match rival supermarkets on the price of hundreds of essential products, including bananas, bread, chicken, bacon and pizza.
The pledge turned up the heat on an emerging price war in the UK’s grocery sector, as retailers compete to prove to customers that they are not using the Iran war as an excuse to hike prices.
Morrisons said its 3.2-per-cent sales growth in the last quarter was its fifteenth consecutive period of growth.
Morrisons weighed down by debt pile
The group said it will accelerate the expansion of its Morrisons Daily convenience arm. The firm opened 71 so far this year and has plans for hundreds more in the coming years, though it has closed dozens of unprofitable convenience stores it acquired from McColl’s in 2022.
Morrisons has been grappling with a mounting debt pile since its takeover by private equity firm Clayton Dubilier & Rice (CD&R) in 2021. Last year, its net debt grew from £7.1bn to £7.5bn.
The group has been forced to take drastic measures to cut this debt. It has sold the freehold rights to large parts of its property portfolio and is reportedly in talks to sell food from its Myton manufacturing business to rival supermarkets.
Morrisons said it has cut its debt mile by 46 per cent since 2022 and still owns the freehold rights to most of its supermarket estate.
Jo Goff, the group’s finance chief, said: “Cumulative cost savings now approaching £1bn helped us offset extensive external cost headwinds while also focussing on what is most important; investment in our colleagues and in stronger value for customers.
“Our working capital improvement programme continues to progress well and our confidence that there is more to come is demonstrated by our decision to raise our target today to £750m.”