Morrisons profit sinks as Covid costs outweigh sales boost
Morrisons today reported higher sales for the first half of the year but said costs related to Covid-19 safety measures had hit profit.
The figures
Morrisons reported total revenue of £8.73bn, down 1.1 per cent on the same period last year.
But like-for-like sales excluding fuel rose 8.7 per cent.
Statutory profit before tax fell 28.2 per cent to £145m.
Net debt was £2.8bn, up from £2.5bn at the same time last year.
Interim dividend increased 5.7 per cent to 2.04p.
Why it’s interesting
Morrisons’ half-year figures show mixed fortunes for the supermarket chain as it battled the impact of coronavirus.
Retail sales excluding fuel and VAT grew strongly over the period, surging 12.7 per cent in the second quarter as the lockdown lifted.
But fuel sales slumped over the same period due to collapsing demand, pulling overall revenue down 1.1 per cent.
At the same time, Morrisons was forced to fork out roughly £155m in the first half on Covid-19 safety measures and 45,000 new and temporary staff members.
This was partly offset by £93m lower business rates relief.
However, the supermarket’s pre-tax profit dropped 28 per cent as a result.
Morrisons said it will pay an ordinary dividend of 2.04p, but its decision regarding a special dividend remains deferred until next year.
Morrisons said it expected Covid-related costs to be broadly offset by business rates relief over the full year.
Shares in the supermarket chain sank almost 4.5 per cent in early trading.
“Contrary to popular belief, the pandemic was not an automatic home run for the supermarkets and the 25 per cent drop in pre-tax profits for Morrisons is proof positive that additional sales come at an additional price,” said Richard Hunter, head of markets at Interactive Investor.
“Overall, the reduction in profit for the period and an overall decline in revenues are understandable, but unfortunately both light of expectations.
“The trading picture excluding fuel looked rather more promising, but the second half of the year will need to be one of heavy lifting for the company to be able to achieve its full-year objectives.”
What Morrisons said
“From the start of the pandemic we stepped up and put the company’s assets at the disposal of the country to help feed the nation,” said chief executive David Potts.
“Morrisons is at the heart of local communities and responded quickly when it mattered most, and we are very grateful for the British public’s appreciation of all the vital work our colleagues are doing. I believe we are seeing the renaissance of British supermarkets.
“We are now looking forward to holding on to what we created in the first half, building on our colleagues’ inspiration and innovation, and sustaining the momentum of a broader, stronger Morrisons. I’d like to again thank every Morrisons colleague for their incredible efforts: you’ve earned your key worker status several times over.”