Morrisons chief executive Rami Batièh faces what one retail analyst has bluntly described as a road that will be “nothing but difficult” as he attempts to revive the struggling grocer.
Batièh, who took charge of the supermarket in November 2023, has pledged to “reinvigorate” Morrisons by cutting prices and driving engagement with its loyalty platform.
The grocer has pointed to Labour tax hikes and fragile consumer confidence as key factors behind its repeated financial losses in recent trading periods.
A ransomware attack on Morrisons’ technology provider in 2024 compounded the pressure, causing food shortages across stores just a year into Batièh’s tenure.
The supermarket posted a 2.8 per cent increase in sales earlier this month but still recorded a £629m pre-tax loss, extending what has become a prolonged hunt for profitability.
The company’s deepest problem, however, remains its net debt, which grew from £7.1bn to £7.5bn in the year to last October following Clayton Dubilier and Rice’s £7bn takeover in 2021.
Batièh has managed to reduce that figure by around 46 per cent since taking over, but the supermarket is now considering selling off a further £1bn worth of property to keep debt levels manageable.
Morrisons has already offloaded large portions of its property portfolio to investors including private equity giant Blackstone and the Saudi sovereign wealth fund.
Retail analyst Catherine Shuttleworth warned that the group’s cost-cutting drive has “gone as far as it can” and that the adverse effects are beginning to show in store standards and availability.
Morrisons shed nearly 5,000 jobs over the past year, with its average monthly workforce falling to 96,232 people, a five per cent year-on-year decline and a 15 per cent drop since October 2022.
A spokesperson for the grocer said the job losses reflect the closure of its newspaper home delivery service, the restructuring of its retail people team, and the downsizing of the Rathbones bakery business.
“There was no additional redundancy programme in stores, where numbers were only reduced by not replacing those who had chosen to leave,” the spokesperson added.
The supermarket has also cited a write-down in the value of McColl’s, the collapsed convenience chain it acquired for £190m in 2022, as a “significant factor” in its pre-tax loss.
Morrisons said it had been forced to close 100 of the 1,100 McColl’s stores it acquired due to “significant cost increases” stemming from government policy decisions.
Despite these challenges, the grocer is pushing into the convenience market, having opened 30 new smaller Daily stores this summer with plans for “hundreds more in the years ahead.”
That ambition will bring it into direct competition with Asda, which is trialling a new partnership scheme with independent corner shops while already running more than 500 Express stores across the UK.
Morrisons’ lease liabilities grew to £2bn in the last year, up from £1.8bn the prior year and £1.2bn in 2022, raising concerns that selling and leasing back more property could push costs higher still.
Nicholas Found of Retail Economics told City AM that “Morrisons has made genuine progress under Rami Batièh,” noting that sales have grown consistently and market share has begun to stabilise after a long period of erosion.
Found cautioned, however, that the challenge remains the “sheer pace and scale of the competition,” with Lidl and Aldi continuing to dominate mid-sized grocery retail across the country.
The supermarket’s continued losses and hefty debt pile “constrain how aggressively Morrisons can invest to close the gap with its rivals,” Found added, leaving the path back to Big Four status far from certain.