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Retail

UK Supermarket Morrisons Sales Fall In 'Fragile' Market

British supermarket group Morrisons reported a 6.4% decline in underlying sales over its latest quarter, in what it called 'a very fragile and difficult consumer environment'.

Britain's fourth largest grocer after market leader Tesco, Sainsbury's and Asda has been owned by US private equity firm Clayton, Dubilier & Rice (CD&R) since October, though the takeover only gained final regulatory clearance this month.

Confidence levels among Britain's consumers sank to a record low this month as they struggle with the accelerating cost of living. Wages are failing to keep pace with inflation that hit an over 40-year high of 9.1% in May and is heading for double digits.

Morrisons said its total revenue including fuel rose 2.6% to £4.6 billion (€5.35 billion) over the 13 weeks to 1 May, its fiscal second quarter, primarily due to a recovery of fuel sales, which increased 54%.

Core earnings, or adjusted EBITDA, rose 14.5% to £71 million (€82.5 million), reflecting a recovery in areas impacted by the COVID-19 pandemic as well as cost savings.

Challenging Trading Environment

'With ongoing inflationary pressure and an increasingly subdued consumer sentiment, the trading environment has been very challenging,' said Morrisons, while noting its underlying sales performance improved towards the end of the quarter, helped by Mother’s Day and Easter.

Monthly industry data has consistently shown Morrisons underperforming its three bigger rivals on a sales value basis.

However, CEO David Potts called its performance "resilient", pointing out the quarter compared to a period of significant COVID restrictions last year when travel and hospitality were both severely limited, boosting grocery sales.

In the same quarter last year, Morrisons also offered discounts to health workers, teachers, farmers and emergency services workers.

Morrisons differs from its main rivals as it also has its own manufacturing operations.

In May, the group acquired the McColl's convenience store business after it fell into administration.

"We are looking forward to working more closely with CD&R as we continue to drive the key pillars of our strategy, focused on being a broader, stronger, popular and accessible business," said Potts.

News by Reuters, edited by ESM – your source for the latest retail news. Click subscribe to sign up to ESM: European Supermarket Magazine.

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