Supermarket giant Morrisons has blamed surging inflation and subdued customer sentiment for a drop in second-quarter sales.

Morrisons Leeds exterior

Morrisons has blamed inflation and subdued customer sentiment for a fall in sales

For the 13 weeks to May 1, the grocer said sales excluding fuel dropped 6.4% year-on-year, although Morrisons did not provide a total sales figure. 

Sales including fuel were up 2.5% to more than £4.5bn – this was driven by a 54% increase in fuel sales.

Adjusted EBITDA grew £9m to £71m for the period driven by cost-cutting measures and what Morrisons called “recovery of profit from areas impacted by Covid”. 

During the period, the Competition and Markets Authority cleared the grocer’s acquisition by US-based private equity group CD&R, and Morrisons launched its biggest ever price cut campaigns to try and offset some inflationary pressures at the shelf edge. 

Over 500 Morrisons products are now covered by the price cut, and the grocer has also slashed prices on a quarter of its entry-level products. 

On May 9, the business also announced its acquisition of convenience store chain McColl’s after it collapsed into administration. The acquisition, which included all of the chain’s 1,100-plus stores and 16,000 staff, is currently being investigated by the CMA. 

Morrisons chief executive David Potts said: “In a very fragile and difficult consumer environment, Morrisons has continued to deliver a resilient performance. This quarter traded over a period of significant Covid restrictions last year when travel and hospitality were both severely limited. As those two activities returned to more normal patterns this year, we saw very strong growth in fuel sales but a step back in grocery.” 

On the current inflation picture and the cost of living crisis, Potts said “these are serious times and there is further serious work ahead of us”. 

“Covid brought into sharp focus the competitive advantage, flexibility and speed that owning our own manufacturing operations brings,” he added. “Our 20 food maker operations around the country are playing an important role in helping us to deliver great value and quality to our customers during another difficult period.

“Now that the CMA process has concluded, we are looking forward to working more closely with CD&R as we continue to drive the key pillars of our strategy, focused on being a broader, stronger, popular and accessible business. I want to thank Morrisons colleagues for their dedication and hard work in helping the business rise once again to meet the new challenges of the cost of living crisis. Together with CD&R, we are determined that colleagues’ pay, health, well-being and happiness must remain at the very centre of our thinking as we start a new and important phase in the company’s history.”

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