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COVID-19 costs Morrisons £155m

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·3-min read
WEST KIRBY, UNITED KINGDOM - JUNE 24: A general view of a Morrisons supermarket on June 24, 2020 in West Kirby, United Kingdom. (Photo by Lewis Storey/Getty Images)
Morrisons has hired 45,000 additional temporary and permanent staff members since the pandemic struck. Photo: Lewis Storey/Getty Images

The COVID-19 pandemic has cost supermarket Morrisons (MRW.L) £155m so far this year, the company said on Thursday.

Morrisons said in a half-year update that costs linked to the pandemic were £155m ($201.6m) in the six months to 2 August. It came as the supermarket invested in safety measures for staff and customers, hired new employees to deal with a surge in online ordering and a rise in the number of staff off sick, and paid bonuses to employees to reflect their hard work during the crisis.

Morrisons has hired 45,000 additional temporary and permanent staff members since the pandemic struck, the company said.

READ MORE: UK supermarkets hire 136,000 staff during pandemic

The supermarket’s chief executive David Potts hailed the hard work of his staff during a challenging period.

“I believe we are seeing the renaissance of British supermarkets,” he said in a statement. “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.”

Undated Handout photo issued by Morrisons of their Chief Executive David Potts.
Morrisons Chief Executive David Potts. Photo: PA

Rising costs were partially offset by a temporary business rates holiday, which saved the business £93m. It meant total costs only rose by £62m.

Even still, the rising costs contributed to a 25% fall in half year pre-tax profits, which fell to £148m. It came despite surging grocery sales. Sales excluding fuel jumped 8.8% to £7.5bn, helped by a 12.3% surge in grocery sales in the second quarter.

READ MORE: Morrisons promises staff Covid-19 pay and expands Amazon home delivery

However, a significant slump in fuel sales pushed overall revenues down as lockdown led to fewer people driving. Morrisons total revenue fell 1.1% to £8.7bn.

Morrisons increased its interim dividend by 5.7% to 2.04p per share. A decision on a special dividend continues to be deferred.The company said it expects COVID-19 costs to taper off in the second half of the year. With business rates relief still in effect, Morrisons expects to reap a net benefit of £62m over the next six months.

READ MORE: Co-op to open dozens of new supermarkets, creating up to 1,000 jobs

“We are confident of continued strong momentum into the second half, improved free cash flow and net debt, and another year of growth in profit before tax and exceptionals,” the company said.

Shares in Morrisons, which had risen in recent days, fell 4% in early trade in London.

Morrisons shares slumped at the open in London. Photo: Yahoo Finance UK
Morrisons shares slumped at the open in London. Photo: Yahoo Finance UK

“Morrisons has had quite a remarkable six months, one that it has emerged from with flying colours to us,” Clive Black and Darren Shirley, retail analysts at Morrisons’ house stockbroker Shore Capital, wrote in a note on Thursday.

“Whilst we live in uncertain times, Morrisons’ future looks bright.”