Morrisons’ strategy remains sensible despite heavy COVID-19 profit blow

Following today’s release of Morrisons H1 figures for 2020/21,

Thomas Brereton, Senior Retail Analyst at GlobalData, a leading data and analytics company, comments:

‘‘Morrisons’ H1 results reiterate that the 2020 food & grocery market – despite unusually high ex. fuel revenue growth across the board – is a stressful arena to operate in at present. While ex. fuel group sales rose 8.8% (aided by strong performances in both retail l-f-l sales and wholesale), underlying pre-tax profit fell 25.3% following the disruption caused by COVID-19, especially extra payroll, colleague and customer safety protection measures, distribution costs, and fuel sales falling 37.4%. Losses are expected to be partly offset by business rates relief, but the full extent of the damage remains unknown – something Morrisons is unwilling to comment on as it fails to report against its existing £75-£125m incremental profit target.

But looking at Morrisons outside the scope of the immediate disruption, its operational flexibility and savvy partnerships leave it in good stead. It has quickly adapted to the booming online grocery channel by doubling the number of weekly home delivery slots, as well as rolling out its click & collect option to 280 stores (from just six in March). Its partnership with Deliveroo is also now at 180 stores, meaning that almost every Morrisons supermarket now offers at least one home delivery service. And, as a large cherry on top, same-day delivery service ‘Morrisons on Amazon’ has expanded to 50 stores and will be available to Prime members by the end of the year.

So as the supermarkets gear up for what is expected to be an exceptionally challenging Christmas period (with at least one wary eye on the growing number of new UK cases), Morrisons appears to have all of its bases covered. But the question for stakeholders is what this has cost and how well Morrisons can financially cope with any further headwinds – a question that likely won’t be fully answered until its full-year results in March next year.”

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