Morrisons Reports £1 Billion Loss, Cuts 8,800 Jobs

Morrisons, the UK's fifth-largest supermarket chain has reported a loss exceeding £1 billion for the year ending October 29th, 2023, marking their second consecutive year of significant losses.

Morrisons cut over 8,800 jobs in 2023, representing nearly 8% of its total staff. While the company emphasises this wasn't a formal redundancy program, it reflects a shrinking workforce as positions are not being refilled.

There are several key factors contributing to Morrisons' challenges. Firstly, the supermarket chain is locked in a fierce battle for market share with discount grocers Aldi and Lidl, who have seen significant growth in recent years.

Secondly, Morrisons is burdened by significant debt stemming from its 2021 private equity takeover. Net debt obligations have ballooned to £8.6 billion, compared to £3.2 billion before the acquisition. These high debt levels translate into substantial finance costs, with the company paying £735 million in 2023, a noticeable increase from the previous year's £590 million.

Further complicating matters, Morrisons acquired the McColl's convenience store chain for £201 million in late 2022, adding to its debt burden. This at a time when interest rates are rising and consumers are tightening their belts due to the cost-of-living crisis.

However, there are glimmers of hope. The company reported an underlying profit of £970 million when excluding debt costs and other one-time items. Additionally, new CEO Rami Baitiéh has prioritized listening to customer needs, aiming to improve the shopping experience and potentially win back market share.

Furthermore, Morrisons' owners are actively seeking solutions to reduce debt. A recent example includes the sale of 337 petrol station forecourts to Motor Fuel Group (another company owned by the same private equity firm) for £2.5 billion in January 2024. While Morrisons retains a stake in the forecourts, this sale provides some immediate financial relief.

Looking ahead, Morrisons faces a critical juncture. The company must navigate a highly competitive market while simultaneously addressing its debt burden. CEO Baitiéh's focus on customer needs and the ongoing efforts to reduce debt offer potential paths for a turnaround, but Morrisons' road to recovery will likely be challenging.