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

The crisis engulfing Morrisons deepened as another slump in sales saw it lose ground to rivals such as Aldi and Lidl.

In the latest blow for the beleaguered Bradford-based grocer since its ill-fated private equity takeover, sales in the 12 weeks to November 27 came in at £2.8billion, 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 9 per cent share of the market.

That is down from the 10 per cent it commanded before its £7billion takeover by US private equity outfit Clayton Dubilier & Rice in October last year.

The fall in market share – which has seen 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 spearheaded the deal.

Shore Capital retail analyst Clive Black said the takeover had been ‘good for shareholders’ but bad for ‘shoppers, suppliers and employees’.

‘David Potts had Morrisons in great shape prior to the bid, but it has been an enormous distraction,’ he said, adding it was ‘clear’ its prices are now less competitive at exactly the wrong time given the squeeze on living standards. 

Morrisons is struggling under the weight of a £6billion debt pile, built up to finance its takeover. The cost of servicing this debt is climbing as interest rates rise and, as a result, it has been pushing up prices faster than rivals.

It has seen an exodus of shoppers and in contrast with Morrisons’ fortunes, the march of Aldi and Lidl continued as hordes of cash-strapped consumers flock to the discounters.

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

Morrisons’ old Big Four rivals also fared much better, with Asda the best performing traditional grocer. Its sales rose 6.1 per cent to £4.4billion. 

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

Waitrose’s recent struggles continued as the John Lewis-owned grocer’s sales fell 1.8 per cent to £1.4billion. 

And online supermarket Ocado, which has struggled with a slowdown since lockdowns eased, saw sales slip 0.2 per cent to £518million. 

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 Morrisons chairman.

The deal was opposed by MPs and senior City figures. Industry experts have branded the takeover ‘at best a distraction, and at worst a bit of a disaster’.  

Analysts have said they expect Morrisons to see a bounce in the coming year. Ratings agency Fitch said the group’s performance would be boosted by convenience store chain McColl’s, which it bought out of administration for £190million in May.

And Black said there have been recent signs of improvement in Morrisons’ prices.