Could the news over the past month get any worse for retailer Morrisons?
After being surpassed recently fourth place in the UK’s supermarket rankings by discount chain Aldi, Morrisons reported that its profits were less than half of what they were during the same period last year, tumbling to just £177m in the third quarter.
And yet, despite the sour 13 weeks that ended in late July and still trying to fight an uphill battle against inflation, Morrisons leaders say they expect the next quarter to be brighter.
“As a foodmaker we feel the effects of inflation earlier than other retailers, but conversely are able to recover more quickly when inflation falls,” Morrisons leaders noted in a statement to shareholders. “The business exited the quarter in a stronger position, with good momentum, and we anticipate this continuing into Q4.”
Chief executive David Potts painted a somewhat dour picture, citing the realities of the effects being levied on consumers. But he believes a turnaround can happen.
“It’s clear that the cost of living crisis is starting to change customer shopping patterns in many ways,” he said. “The speed, scale and severity of cost and energy price increases, exacerbated by the terrible war in Ukraine, had significant impacts through the quarter, but the market is still growing and the energy price guarantee will ease pressure on consumers.”
Revenue in the third quarter was actually up, but operational costs combined with other factors have led to poor EBITDA, which has included significant supply disruptions.
So how is Morrisons, which was taken over by Clayton, Dubilier and Clayton, Dubilier and Rice, positioning to reverse those trends and make a comeback?
“We are doing everything we can to keep prices down for customers,” he said. “Last quarter we introduced one of our biggest ever price cut campaigns and in Q3 we introduced our popular Summer Collector scheme. Earlier this week we announced another significant price cut programme across 150 of our most popular products and tomorrow we are launching a timely fuel promotion – with 5p a litre off with a £40 spend in store – to help customers with the high cost of motoring. We are also improving our digital capabilities and investing strongly in our My Morrisons card and app, helping us to incentivise and reward our customers in a more personalised and targeted way.”