Rising food prices take a toll on shoppers, according to Morrisons
Morrisons, the UK's fifth largest supermarket group, reported a growth of 3.5% in total sales for the 13 weeks to July 27, amounting to £4 billion. This growth, however, represents a slowdown from the previous quarter's growth of 4.2%.
The business environment for Morrisons is challenging, with the CEO, Rami Baitieh, citing cost headwinds linked to the previous autumn budget and other Government legislation as significant factors. These headwinds include increased national minimum wage, national insurance contributions, and new packaging taxes.
In response to these challenges, Morrisons announced price cuts on around 650 products this week. The retailer is investing in price to attract more customers amid the growth of discount rivals and similar price strategies by Tesco and Sainsbury's. Morrisons is also tailoring promotions and offering more rewards for loyalty to its More Card customers.
Jo Goff, the chief financial officer of Morrisons, stated that they delivered a resilient performance in Q3 despite tough market conditions and significant external cost headwinds. The supermarket remains on track to hit its target of £1 billion in savings by the end of the 2026 financial year.
The rate of food and drink inflation rose to 5.1% in August, according to the Office for National Statistics (ONS). Baitieh acknowledged the impact of rising food prices, stating that consumers are "feeling the squeeze". Morrisons is working hard to help customers make the most of stretched household budgets.
Since the acquisition of the business by CD&R (Clayton Dubilier & Rice), Morrisons has repaid a total of £2.7 billion of debt, bringing the current debt figure down by around 43% from £6.2 billion to £3.5 billion. The supermarket also completed a material refinancing, reducing gross debt and extending maturities to 2031.
Inflation has increased further for Morrisons over the past two months. Despite these challenges, Morrisons secured £63 million of cost savings over the period. The company is determined to navigate the challenging market conditions and continue providing value to its customers.
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