Morrisons profits plummet in ‘horrible first year’ under private equity ownership
Morrisons’ profits plummeted in a “horrible first year” under private equity ownership.
The supermarket group, which was taken over by US takeover giant Clayton, Dubilier & Rice (CD&R) for £7bn at the end of 2021, reported a 15% drop in profits to 828 million pounds for 2022.
The results capped a dark period after it lost its position among the UK’s big four grocers, after being overtaken by Aldi.
Struggles: Morrisons Falling fortunes are a setback for former Tesco boss and industry guru Sir Terry Leahy (pictured) who led the takeover
The collapse of fortunes is a setback for former Tesco boss and industry guru Sir Terry Leahy, who now works for CD&R and led the Morrisons takeover.
Shore Capital analyst Clive Black commented: “It’s been a pretty awful first year for Morrisons under new ownership.”
Like-for-like sales fell 4.2% last year, but business improved as the year progressed. In the three weeks leading up to Christmas Day, sales were up 2.5% from a year earlier.
Boss David Potts said Morrisons had won over disenchanted buyers with further price cuts in recent weeks. The Christmas revival was proof that customers “have started voting with their feet”.
“In a very difficult time for consumers and businesses, we continue to do everything we can to keep prices low for customers and to support our colleagues,” he said.
Morrisons’ ownership of its supply chain has meant it has been hit harder by “rampant inflation” than rivals last year, affecting its ability to deliver affordable prices, Potts admitted.
Since then, he has been “throwing up the gas on price cuts”, recently slashing the cost of 820 items to keep shoppers coming back.
Levels of pessimism among customers, which he tracks twice a week, “dimmed off for a little while” over Christmas, as shoppers looked forward to a Covid-free Christmas and enjoyed the World Cup.
Morrisons rescued McColls from the brink of collapse last year, but had to wait until regulatory hurdles were lifted before moving forward with plans for the convenience store chain.
The Competition and Markets Authority “really put the brakes on work” by taking some time to approve the deal, forcing Morrisons to sell 28 McColls stores, Shore Capital’s Black added.
“But the debt that Morrisons now has is a big negative change from where it was and a big strain on management’s ability to run the business,” Black said.
