Takeover target Morrisons has warned of pressure on prices due to the lorry driver shortage as it revealed that half-year profits tumbled.
The supermarket chain – which is at the centre of a bidding battle between two US private equity firms – said it expects industry-wide retail price inflation in the coming months as a result of the HGV driver shortage, global commodity price increases and higher haulage costs.
But it said it will seek to reduce the impact of the cost pressures and supply issues to keep its shelves stocked.
We're not immune, but we're more in control of the train set
David Potts, Morrisons chief executive
Speaking to the PA news agency, chief executive David Potts said the group had seen price inflation start to come through over the past month, which is set to “continue for a while”.
This has impacted the price of beef and wheat-based items, while he added there was pressure on supplies of items such as pet food amid surging pet ownership during the pandemic.
He said: “Pet food has been quite short, as well as fizzy drinks, bottled water, crisps and some wines.”
But he said that as Britain’s biggest single food-maker, Morrisons is better able to secure supplies and is offsetting price rises in some areas, with cuts on a raft of other products.
“We’re not immune, but we’re more in control of the train set,” he said.
The chain is also resorting to using its own lorries to pick up stock from suppliers struggling amid the driver shortage.
The comments came as the group posted a 43% fall in statutory pre-tax profits to £82 million for the six months to August 1, down from £145 million a year ago.
Underlying pre-tax profits fell 37% to £105 million, with the group blaming a hit from £41 million in pandemic-related costs, as well as £80 million in lost profit across its cafes, petrol forecourts and food-to-go.
When adjusted for the timing of business rates payments a year earlier, underlying profits rose 42% to £93 million.
The group has received offers for the company from buyout firms Clayton Dubilier & Rice (CD&R) and Fortress, but last month the Morrisons board backed CD&R’s offer of 285p per share, valuing the group at £7 billion.
Shareholders will vote on the deal in or around the week of October 18.
With no final offers yet tabled by either party, Morrisons said on Wednesday that it is in discussions with the Takeover Panel to launch an auction in the hope of bringing to an end the three-month bidding war.
An announcement by the Takeover Panel is expected shortly, with a date for later this month expected to be set when any bidders must make their offers final.
First-half figures revealed the group has forked out £5 million in costs so far amid the bidding process.
The retailer’s half-year results showed that like-for-like sales, excluding fuel and VAT fell 0.3%, having fallen 3.7% in the second quarter against a 2.7% rise in the first three months.
On a two-year basis to strip out the volatility caused by Covid, it said sales rose 8.4%.
The group stuck by its profit guidance for the full year, of underlying pre-tax profits including business rates paid to be higher than the £431 million it made the previous year, excluding the £230 million of rates relief that was waived.
It expects the second half to see lower lost profits, “minimal” direct costs related to the pandemic and efforts to mitigate price inflation in its supply chain.