Morrisons says earnings likely to be hit hard by inflation and war in Ukraine | Morrison
Morrisons has warned its profits are set to take a hit this year as the cost of living crisis and war-related disruption in Ukraine weigh on the grocery market.
The UK’s fourth-largest supermarket chain said the “changing geopolitical environment” and “continuing and growing inflationary pressure” since early February were hitting consumer sentiment and spending.
He said it was difficult to predict how long the problems would last and that unless conditions improve he could face a “significant negative effect” on sales and profits for the year. .
It had already seen a drop in revenue for the three months to January 30 compared to the same period a year earlier. In a statement ahead of a meeting with investors who helped fund a £7bn takeover deal in October, Morrisons said underlying quarterly profits through January had plunged almost 10% to £316 million.
The statement highlights retailers’ struggle with soaring inflation on commodities, from milk and eggs to sunflower oil and wheat. Disruption to supply chains caused by the war in Ukraine has added to existing pressures from increased consumer demand as pandemic restrictions have been lifted in many countries.
Rising energy prices – partly resulting from sanctions imposed on Russia, which is a major supplier of oil and gas, as well as rising labor costs in the UK linked to the Brexit and the pandemic – also increases costs for businesses and fuels inflation.
Families began changing their grocery shopping habits as they looked for ways to save money in the face of rising energy bills and gas prices, and many between them turn to discounters.
About a third of businesses in the food and drink sector said sales were below their expectations between December and February, according to the latest data from the Office for National Statistics.
The ONS also found that food and drink producers were more likely to have incurred additional costs due to rising energy prices and Brexit compared to other businesses.
Morrisons seems to be one of the biggest losers of consumers who bargain. According to the latest data from industry analysts Kantar, the retailer’s sales fell 11.5% in the three months to March 20, more than any other major chain.
Aldi and Lidl, the German discount chains that typically do well when family budgets are under pressure, were the only grocery chains to see sales rise by attracting bargain-hunting shoppers.