Morrisons plans to cut £700 million in costs despite revenue rise
Morrisons says it wants to cut £700 million in costs over the next three years to reduce prices despite a consumer spending squeeze.
The supermarket chain, which reported quarterly sales declines through 2022, has now revealed a 0.1 percent rise in same-store sales in the three months to the end of January.
The supermarket chain’s total sales increased by 3.4 percent to £4.7 billion.
Despite this, the 124-year-old grocer announced a £700 million cost-cutting plan to “enable further investment in price reductions.”
The business, which employs 110,000 people, did not specify where the savings would be made, but sources said they would come from changes to its back office and logistics practices rather than job cuts or store closures.
Morrisons has struggled since a bidding war ended in October 2021, with US private equity company Clayton, Dubilier & Rice (CD&R) acquiring it for £7 billion.
During the cost-of-living crisis, it confronted food shortages, rising prices, and a squeeze on consumer spending.
Concerns have been expressed about the group’s direction under its new ownership.
Earlier this year, the banks that backed the Morrisons transaction sold €500 million (£440 million) of debt at a steep discount, resulting in a loss on their investment.
David Potts, the chief executive of Morrisons, said there was “plenty of work to do” but momentum was building, with an “improving trajectory over the last three quarters.”
Potts said its market share had stabilised and its inflation rates were below peers’.
Potts said: “We have targeted £700m of cost savings over the next three years. This saving will help drive the performance of the business by enabling further investment in our loyalty programme, increasing the pace of [the convenience store chain] McColl’s conversions, putting more hours into our stores, as well as mitigating the significant cost headwinds that we face.”
According to Kantar, Morrisons now accounts for 8.8 percent of the UK grocery industry, down from 9.5 percent a year ago. Aldi, which surpassed Morrisons to become the UK’s fourth largest supermarket last year, accounts for 9.9 percent of total grocery purchases, up from 8.6 percent the previous year.
Morrisons suffered a pre-tax loss of £33 million in the fiscal year concluding 30 October.
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Potts continued: “Although this has been another difficult period for consumers with inflation still at very high levels, we have continued with our programme of regular and meaningful price investments, enabled by a strong start to our cost savings programme.”
Source: The Guardian