Morrisons pay

An update to investors for the 13 weeks ended 1 May revealed a 6.4% decline in like-for-like sales in the second quarter

Morrisons has blamed a “very challenging” trading environment and increasingly subdued consumer confidence for a slump in sales.

An update to investors for the 13 weeks ended 1 May revealed a 6.4% decline in like-for-like sales in the second quarter.

Morrisons said trading improved towards the end of the quarter, lifted by a “strong” performance over Mother’s Day and Easter. The group added that Q2 figures also suffered from comparisons with a year ago, when Covid restrictions elevated sales.

Total revenues, including fuel, rose 2.6% to £4.6bn, with a 54% sales boost at the petrol pumps offsetting the decline in grocery to lift total like-for-like figures by 2.5%.

Adjusted EBITDA also jumped 14.5% to £71m given the absence of costs related to Covid and other savings made across the business.

Recent updates from Kantar and Nielsen showed Morrisons to be the worst-performing big four supermarket over the past several months, with sales down 7.2% in the 12 weeks to 12 June and 6.3% in the four weeks to 18 June, according to the two insights firms.

CEO David Potts called the second-quarter performance “resilient” in “a very fragile and difficult consumer environment”.

“This quarter traded over a period of significant Covid restrictions last year when travel and hospitality were both severely limited,” he said. “As those two activities returned to more normal patterns this year, we saw very strong growth in fuel sales but a step back in grocery.”

Potts added that discounts offered to key workers, such as NHS staff, teachers and farmers, as a thank you for work done over the pandemic, had also affected growth in the quarter.

In April, Morrisons also launched one of its biggest-ever price cut campaigns, which involved more than 500 products and included more than 25% of its entry-level lines.

Potts said there was more to do to help customers. “These are serious times and there is further serious work ahead of us as we help customers and colleagues face into the highest inflation for 40 years.”

He added that Morrisons’ vertically integrated model, with its own manufacturing operations, gave the group a competitive advantage over rivals.

“Our 20 food maker operations around the country are playing an important role in helping us to deliver great value and quality to our customers during another difficult period.”

The comments follow media speculation earlier this month that its private equity owner was sounding out potential buyers of the chain’s warehouses, fisheries and food manufacturing, in a process that could raise more than £600m.

Since the quarter end, the supermarket has acquired the collapsed convenience group McColl’s from administration and the CMA has cleared the takeover of Morrisons by Clayton Dubilier & Rice.

“Now that the CMA process has concluded, we are looking forward to working more closely with CD&R as we continue to drive the key pillars of our strategy, focused on being a broader, stronger, popular and accessible business,” Potts said.

“I want to thank Morrisons colleagues for their dedication and hard work in helping the business rise once again to meet the new challenges of the cost of living crisis.

“Together with CD&R, we are determined that colleagues’ pay, health, wellbeing and happiness must remain at the very centre of our thinking as we start a new and important phase in the company’s history.”