Morrisons chingford store

Morrisons has warned rising commodity costs and the HGV driver shortage will push up supermarket food prices later this year.

Delivering its half-year trading update, the supermarket said it had delivered lower prices despite various price pressures in commodities and freight and higher HGV costs. 

“As well as the direct effects of the pandemic, other features of the first half this year were the impacts of rising commodity prices and freight inflation, plus a shortage of HGV drivers across the UK,” its trading update said. “We absorbed many of these industry-wide price and cost pressures, which was an investment in margin, and helped us sustain lower prices and deflation for customers.”

However, with these cost pressures set to persist during the second half, supermarket price hikes were likely later this year, it warned.

“We expect some industry-wide retail price inflation during the second half, driven by sustained recent commodity price increases and freight inflation, and the current shortage of HGV drivers,” the trading update said.

“We will seek to mitigate these and other potential cost increases, such as any incurred to maintain good on-shelf availability.”

Morrisons saw like-for-like sales fall 3.7% in the second quarter against “tough” year on year comparatives, while first half pre-tax profits fell by more than a third due to Covid costs and business rates.

However, total revenue was up 3.7% to £9.05bn in the first half - with fuel sales surging by 26.9% to £1.51bn as Britain opened up from lockdown.

Wholesale performance was up by the equivalent of 18.1% on a like for like basis in the first half, boosted by 230 extra McColl’s stores and new supply arrangements, including buying group Unitas, wholesaler Blakemore and two other convenience forecourt retailers.

It also sustained strong growth online, with and ‘Morrisons on Amazon’ contributing to 48% year-on-year growth in the channel in the first half.

Despite ongoing cost pressures, Morrisons said it expected full-year profit before tax and exceptionals including rates paid to be higher than the £431m achieved in 2020/21, excluding the £230m waived rates relief. 

Assumptions for the second half include significantly lower lost profit, minimal further direct Covid-19 costs, and mitigation of potential sustained cost increases in the supply chain.

“Across the business the whole Morrisons team has shown commendable resilience facing into a variety of continuing challenges during the first half, including the ongoing pandemic, disruption at some of our partner suppliers, and the impact on our supply chain of HGV driver shortages,” said chairman Andrew Higginson.

“As we approach our busiest time of year, I’m confident the team will continue to rise to all challenges and keep up all the good work to improve the shopping trip for customers.”

CEO David Potts added: “I want to thank all Morrisons colleagues for their unswerving dedication and commitment during the long pandemic period. Their innovation, enterprise, hard work and boundless compassion have shone through, and a new Morrisons is taking shape. You are a special team and together have built a strong and broad foundation on which Morrisons will thrive in the future.”