Morrisons sales slump puts grocer’s private equity owners in spotlight

The crisis that engulfed Morrisons worsened when another slump in sales saw it lose ground to rivals such as Aldi and Lidl.

In the latest blow to the beleaguered Bradford grocer since its ill-fated private equity takeover, sales in the 12 weeks to November 27 were £2.8 billion, down 4.7 per cent on the same period last year.

It was the only major supermarket to see sales fall, leaving it with a market share of 9 percent.

That’s less than the 10 percent it had before its £7 billion takeover by US private equity firm Clayton Dubilier & Rice last October.

The drop in market share – which saw it overtaken by discounter Aldi and booted out of the ‘Big Four’ – is a humiliation for Morrisons chief David Potts and former Tesco boss Sir Terry Leahy, who now works for CD&R and was in charge about the deal.

Shore Capital retail analyst Clive Black said the acquisition was “good for shareholders” but bad for “customers, suppliers and employees.”

“David Potts had Morrisons in great shape prior to the bid but it was a huge distraction,” he said, adding it was “obvious” that prices are now less competitive at exactly the wrong time given pressures on living standards .

Morrisons is struggling under the weight of a £6bn mountain of debt built up to fund the takeover. The cost of paying off this debt rises as interest rates rise and as a result it has pushed prices up faster than rivals.

It has seen an exodus of shoppers and unlike the fortunes of Morrisons, the rise of Aldi and Lidl continued as hordes of destitute consumers flocked to the discounters.

Aldi was the fastest growing grocer in the 12 weeks to November 27, with sales up 24.4 per cent to £2.9 billion. Meanwhile, Lidl’s turnover rose 22 per cent to £2.3 billion, meaning grocers collectively account for 16.7 per cent of the market.

Morrisons’ old Big Four rivals fared much better too, with Asda the top-performing traditional grocer. Sales rose 6.1 percent to £4.4 billion.

Sainsbury’s sales also increased by 4.3 per cent to £4.8 billion during the period. And the UK’s largest supermarket, Tesco, which takes up 27.2 per cent of the market, grew 3.9 per cent to £8.2 billion.

Waitrose’s recent troubles continued as sales at the John Lewis-owned grocer fell 1.8 percent to £1.4 billion.

And online supermarket Ocado, which has been struggling with a slowdown since lockdowns eased, saw sales fall 0.2 per cent to £518m.

CD&R bought Morrisons last year after a tense bidding war against rival private equity firm Fortress.

The deal was orchestrated by Leahy, who works for CD&R and took over as chairman of Morrisons.

The deal was opposed by MPs and senior city figures. Industry experts have labeled the acquisition as “a distraction at best, and a bit of a disaster at worst.”

Analysts have said they expect Morrisons to see an uptick in the year ahead. Rating agency Fitch said the group’s performance would be boosted by convenience store chain McColl’s, which bought it out of administration in May for £190m.

And Black said there are recent signs of improvement in Morrisons prices.