Following the release of Morrisons’ figures for Q2, FY2021/22; Amira Freyer-Elgendy, consumer analyst at GlobalData, a leading data and analytics company, offers her view: “An underwhelming set of results from the grocer and its delay in pushing value for shoppers makes Morrisons vulnerable to losing market share this year. Although high petrol prices have inflated total revenue, up 2.6%, retail figures look more dire once fuel is stripped out. At -6.4% l-f-l sales, Morrisons performance is notably weak compared to Tesco’s UK l-f-l comparative of -1.5% (13 weeks to 28 May), while Sainsbury’s results are out next week and we forecast a l-f-l fall in the region of -2% to -3.5%.
“According to GlobalData’s 2022 Q2 consumer survey, 62% of UK shoppers are extremely or quite concerned about their personal financial situation and with tangible rises in household bills offsetting any increases in wage growth, combined with food inflation, consumers are cutting back – especially those in lower income groups. Of the other major grocers, Morrisons has been slow to react and adapt to this new budget squeeze to avoid losing customers. The grocer launched its price cuts in April, alongside Asda which promised to keep the prices of selected everyday essentials low until the end of the year. Morrisons’ discount strategy does not make any such promises, and while this is probably wise given inflation continues to climb, it may limit the appeal of its price cuts versus rivals. This trading update did indicate, however, that the retailer will do more in coming months to help shoppers navigate the cost-of-living crisis – though this may be too little too late as shoppers have already started to switch and shop around.
“The higher margins in fuel this year will allow Morrison’s to reinvest in retail price cuts and absorb some of the price pressures coming through in food, while its local sourcing strategy will help cushion the retailer from some of the global supply-chain issues. Indeed, EBITDA rose 14.5% in the quarter, aided by the reduction in COVID related costs. Morrisons’ new owners have diversified over the period, adding new revenue streams and targeting different consumption occasions through convenience channels McColls and Gopuff. Both the UK convenience and the Q-commerce markets will outperform over the next five years, so while these are strategic moves, attention on its core grocery offer must not drift else it risks losing its fourth-place market position to Aldi.”