Morrisons reported widening losses for the first quarter, after being weighed down with debt financing costs related to its private equity acquisition.
The supermarket chain reported pre-tax losses in the amount of £156m for the 13 weeks ending January. This comes at a time when the business is pursuing an ambitious turnaround strategy.
The Bradford retailer’s losses grew after it incurred finance costs of £141m over the period due to higher interest rates.
Morrisons is under huge financial pressure after being bought by Clayton, Dubilier & Rice for £10bn (in 2021) by the private equity firm Clayton, Dubilier & Rice.
The company was forced to leave the London Stock Exchange after the deal, for the first since 1967. It now owes billions of pounds.
Morrisons is now facing increased financial pressures due to a sharp increase in borrowing costs. Its net debt has risen to £7.28bn, up from £7.28bn at the end of January.
Morrisons suffered a loss of £1bn per year in 2023.
The retailer has had a harder time borrowing money since last year when Moody’s, the credit rating agency, downgraded Morrisons’ outlook from “stable to “negative”.
Chief Executive Rami Baitieh is fighting to transform the business, after Aldi became Britain’s 4th largest grocer in 2022.
Mr Baitieh was hired by Carrefour in November to replace David Potts. He has promised to “reinvigorate the company” after admitting that it had “fallen below the pack”.
In order to achieve this, he aims at making grocery items cheaper and increasing the retailer’s market share.
Morrisons has recently started matching the prices of Aldi and Lidl in order to attract customers away from discounters. It also began rolling out general merchandise to its stores in an effort to mimic the “middle aisles” of discounters.
In January, it was revealed that Morrisons had created areas in their stores to test selling low-priced luggage, shoes and jewellery.
Mr Baitieh has also taken an active role in handling complaints, by adding his email to the customer service page of the company. Morrisons also ditched the four-day work week policy for its head office employees.
Accounts published on Wednesday reveal that the total revenue of Morrisons holding company Market Bidco remained unchanged at £4.7bn in the last quarter, after being affected by a drop in fuel sales.
Morrisons has said that its sale of 337 petrol stations to Motor Fuel Group, for £2.5bn, is expected to be complete by the middle of 2024.
After tax and fees, the retailer will receive £1.8bn. The bosses are expected to use the majority of the payment to pay down its debt.
Joanna Goff, Morrisons chief financial officer, said earlier this year: “I do not actually see debt reduction as two separate components.
“Reducing our debt level will reduce interest costs, and in turn we’ll be able to invest more in the shops.”