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Staff bonuses and food bank donations contribute to Morrisons £290m COVID-19 costs

Staff member Sally O'Hara helps launch the Morrisons Acts of Community Kindness campaign. Photo: PA
Staff member Sally O'Hara helps launch the Morrisons Acts of Community Kindness campaign. Photo: PA (PA)

Supermarket Morrisons (MRW.L) revealed in its preliminary results that it will incur £290m ($404.6m) of COVID-19 related costs.

In the 52 weeks until 31 January, Britain's fourth biggest grocer by sales revealed that the hiring of extra staff, extra employee recognition bonuses and pay, as well as food bank donations contributed to the largest slice of COVID-19 related costs — more so than staff and customer protection measures.

Table: Morrisons
Table: Morrisons (Morrison's)

“Morrisons key workers have played a vital role for all our stakeholders during the pandemic, especially the most vulnerable in British society, and their achievements over the last year have been remarkable. I am delighted that we are recognising their enormous contribution by becoming the first supermarket to pay a minimum of £10 an hour to all store colleagues," said David Potts, CEO of Morrisons.


"We are also today showing our continuing gratitude and appreciation for the incredible work of other key workers in the nation, by extending our 10% discount for NHS staff for the whole of 2021.

“I'm pleased with the greater recognition, warmth and affection for the Morrisons brand from all corners of the nation, following a year like no other. We must now look forward with hope towards better times for all, and we’re confident we can take our strong momentum into the new year, targeting profit growth and significantly lower net debt during 2021/22.”

Morrisons prelim results showed that annual profit halved. While the grocer saw a jump in revenue, the huge extra costs from the pandemic had offset sales. but coronavirus—related jump in sales was more than offset by the huge extra costs of the crisis.

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Morrisons posted profit before tax and exceptional items of £201m, compared with analysts' average forecast of £200m and £408m made in 2019-20. While its like-for-like sales rose 8.6% over the year, direct pandemic costs of £290m cratered its profit.

"Morrisons hasn't just benefited from a rise in grocery spending, they have also timed an extensive store refurbishment programme to gobble up additional market share," said Ross Hindle, analyst at Third Bridge.

"Morrisons farm-to-fork business model has helped them avoid the supply constraints other retailers have had to grapple with. Their integrated operating model should help the Group navigate the complexities of Brexit, which has placed stress on supply chains across the UK market."

READ MORE: Morrisons to pay staff at least £10 an hour in new deal

Seven of Britain's biggest supermarkets — including Asda (WMT), Tesco (TSCO.L), Sainsbury’s (SBRY.L) — have all been on a key worker hiring spree since the beginning of the pandemic due to the level of demand needed to cater for a nation that have mostly been stuck at home in lockdown for a majority of 2020 and now 2021.

Morrisons recruited more than seven times as many workers as initially planned in March. The grocer, which employs around 120,000 people across the UK, announced in January this year that it will guarantee at least £10 an hour for all staff, starting in April. The new payment policy will result in a “significant” pay increase for nearly 96,000 staff members.

The group also confirmed that there will be a London weighting in addition, with rates for inner London rising by 85p and outer London by 60p per hour.

"Stores have had to introduce expensive social distancing measures whilst also hiring more staff to meet increased demand," said Hindle.

"Our experts expect Morrisons to continue to develop its wholesale business and to grow its margin accretive non-food home-ware and clothing offer. Specialists believe further growth in these areas will continue to differentiate Morrisons relative to the Big 4 and could offer some margin protection to the Group."

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