Morrisons hit by £155m in Covid costs as grocery sales surge

Supermarket giant Morrisons has seen grocery sales surge after the pandemic drove demand, but posted lower profits after booking £155 million in costs related to the crisis.

The Bradford-based retailer said pre-tax profits slipped by 25.3% to £148 million in the six months to August 2 as a result.

It said the jump in costs was partly offset by £93 million in benefits from the Government’s business rates holiday.

However, chief executive David Potts said the retailer is “expecting and planning for profit growth in half two” as strong grocery sales continued.

The supermarket chain reported that like-for-like sales, excluding fuel, increased by 8.7%, as it was particularly buoyed by rapid online growth.

Morrisons said it has expanded its online and home delivery capacity “five-fold” after the coronavirus crisis sparked demand for deliveries.

The group also launched new online propositions, including a partnership with Deliveroo which has now expanded to 180 sites.

Mr Potts said on Thursday that he believes we are seeing “the renaissance of British supermarkets”.

He said: “From the start of the pandemic we stepped up and put the company’s assets at the disposal of the country to help feed the nation.

“Morrisons is at the heart of local communities and responded quickly when it mattered most, and we are very grateful for the British public’s appreciation of all the vital work our colleagues are doing.

“We are now looking forward to holding on to what we created in the first half, building on our colleagues’ inspiration and innovation, and sustaining the momentum of a broader, stronger Morrisons.”

The chief executive also stressed that it was the company’s preference that the Government would secure a tariff-free Brexit deal.

“Tariffs do drive inflation, so in any year no-one wants to see increased prices, particularly not as we are in a recession,” he said.

It comes just days after the company announced reductions on about 400 essential items as it became the latest grocer to slash prices.