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Supermarket chain WM Morrison has become the latest UK retailer to warn that it will accelerate cost-cutting following the Labour government’s recent tax increases on employers, as the chancellor defended the move.
Chief executive Rami Baitiéh, who joined the private equity-owned supermarket in 2023 to revive its fortunes and arrest a decline in sales, said its existing cost-saving programme would be sped up partly in response to chancellor Rachel Reeves’ increases in employers’ national insurance contributions and the national living wage that were unveiled in her October Budget.
Baitiéh said that “with the Budget pressures . . . I’m talking about how we can go harder and deeper” to make the retailer more efficient and productive, having saved £312mn in costs in the year to October 27. Morrisons’ national insurance bill will go up by £75mn a year, he said.
The grocery chain, which was acquired by US firm Clayton Dubilier & Rice in a leveraged buyout in 2021, had no plans at present to slash jobs, Baitiéh added, after rival Sainsbury’s this month said it would axe 3,000 jobs.
Separately, Tesco, the UK’s biggest private-sector employer, said on Wednesday that it would cut 400 jobs, affecting bakery roles in some stores, as well as the management of its mobile phone shops. The decision is meant to simplify the business further, said the company, which has more than 330,000 employees, in a statement.
Baitiéh’s comments came as Reeves, in a speech on Wednesday, defended her decision to increase employers’ NICs but acknowledged there were “consequences on business and beyond”.
Separately, Morrisons boasted about recording the strongest quarterly sales improvement in almost four years, thanks to better product availability and competitive prices that attracted shoppers to its stores.
But since its financial year ended, growth slowed quarter on quarter after a cyber attack at a technology provider affected availability and subsequently dented Christmas sales.
Baitiéh said: “Nothing in retail is a straight line and that was certainly the case in the first quarter. Our availability is improving, and although it remains above last year, it is not yet back to pre-incident level.”
Morrisons is the UK’s fifth-biggest supermarket by market share. According to industry data this month from Kantar, Morrisons’ sales growth lagged behind Tesco and Sainsbury’s — the UK’s two largest supermarket chains — as well as discounters Aldi and Lidl during the festive period.
Morrisons’ like-for-like sales rose 4.9 per cent in its fourth quarter to October 27, the strongest quarter since the start of 2021, compared with a 3.3 per cent increase during the same quarter the previous year.
Group full-year like-for-like sales were up 4.1 per cent, while total revenue increased 3.8 per cent to £15.3bn. Underlying profits, its preferred metric, rose 11.2 per cent to £835mn, the company said.
Annual pre-tax loss broadly halved to about £500mn, according to finance chief Jo Goff, and net debt has fallen to about £3bn, from £5.5bn “at peak”. Its annual interest payments are about £250mn a year, she added.
Last year Morrisons agreed a deal to sell its petrol forecourt business to Motor Fuel Group, also owned by CD&R, with the majority of the £2.5bn proceeds used to pay down its debt.
Eleanor Simpson-Gould, a retail analyst at GlobalData, said: “Morrisons has begun to emerge from a bleak period of meagre sales and mounting debt with a strengthened balance sheet.”
