Morrisons – sharp profit drop as bidding war heats up

The UK supermarket subject to a bidding war, Morrisons has reported a 37.1% drop in profits for the first half of the financial year. This is partly due to costs associated with the pandemic and the truck driver shortage.

According to the Morrisons CEO David Potts, the supply chain is at full stretch. “That combination of a dearth of labour, a dearth of skills, the pingdemic and COVID cases does mean that everywhere in the supply chain there is strain,” he said.

One of the problems with the HGV driver shortage is that suppliers that used to send goods to Morrisons now rely on the supermarket to collect them from them.

For the six months to 1st August the supermarket chain reported a profit before tax of £105 million, down from £167 million in the same period in 2020.

Direct costs associated with the pandemic were £41 million, and a significant hit to profit – an estimated £41 million drop – came from reduced sales at cafes, fuel stations and food-to-go areas as trading was impacted by the pandemic.

The news comes as two private equity firms – Fortress and Clayton, Dubilier & Rice (CD&R) go head to head in a bidding war for the supermarket chain. The latest bid of £7 billion by CD&R is likely to be matched or increased by Fortress in a coming auction, which as Apex Insight reported earlier this week, is having the terms agreed between the three parties at present. The results may well be decided in the coming month.