Morrisons warns of ‘industry-wide’ inflation as profits drop 37.1%

Morrisons has forecasted “industry-wide” price increases across the retail sector during the second half of FY22, as HGV driver issues continue to cause supply chain disruptions.

The supermarket chain attributed the expected hike in prices to recent commodity price increases and freight inflation, as well as the ongoing driver shortages.

In turn, the group claimed that it aims to “mitigate” the inflation and other “potential cost increases” potentially caused by maintaining “good on-shelf availability”.

The warning came as Morrisons reported a 3.7% year-on-year rise to total revenues of £9.05bn in the half year to 1 August 2021.

While like-for-like sales excluding fuel and VAT at the supermarket chain fell 0.3% from H1 FY21, they remained 8.4% up from the same period two years ago.

Despite the rise in revenues, profit before tax and exceptionals at the firm declined 37.1% year-on-year to £105m.

Morrisons attributed this to £41m of Covid-19 costs, and £80m of lost profits across its cafes, fuel, and food-to-go operations.

Andrew Higginson, chair at Morrisons, said: “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. 

“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.”

In a period impacted by CD&R and Fortress’ ongoing takeover offers, no interim dividend has been declared by the group.

Looking ahead, Morrisons has forecasted a PBT and exceptionals including rates paid of over £431m for FY22.