Morrisons’ profits for 2020 slumped by half, which the supermarket’s chief executive called a badge of honour as the extra costs incurred in “feeding the nation” during the coronavirus crisis cancelled out the benefits of higher sales.
The Bradford-based company’s annual pre-tax profit before one-offs fell to £201m on sales of £17.5bn.
David Potts, Morrisons chief executive, pointed to £290m of costs stemming from the pandemic, including covering for worker absence and paying store staff a bonus, coupled with the decision to return £230m of business rates relief.
“I personally wear the halving of profits as a badge of honour,” he said. “It’s one thing being asked to keep indoors for most of the year, it is quite another if you haven’t got access to food.
“Of course the British people have had access to food because supermarket workers were asked by government to be key workers and [stores] required to stay open unlike pretty much the rest of society. So frankly we could have made no profit and it would have been a result.”
Sales at established stores were up by nearly 9% in the year to the end of January. Online sales tripled during the year, and capacity was up fivefold.
The company’s online and wholesale businesses, which benefit from a tie-up with Amazon, were profitable, and Potts expected their financial contribution to increase.
Despite winning customer loyalty with its efforts during the pandemic, including food-bank donations and food-box deliveries, the company is unloved by the City. The decline in its share price led to it being booted out of the FTSE 100 last week. Its shares were trading down marginally on Thursday after the full-year results announcement.
Potts said shareholders had been rewarded with higher dividends and pointed to a recovery in profits as the economy reopens. The closure of its cafes and decline in fuel and food-to-go sales alone wiped out £100m off profits.
Freetrade’s senior analyst, Dan Lane, said investors had got ahead of themselves when they anticipated supermarkets would profit from last year’s panic-buying.
“The cost of servicing the loo-roll hoarders has been eye-watering,” he said. “Covid-related impairments have really weighed Morrisons down but that’s hopefully a one-off. Looking ahead, there’s a lot for investors to mull over, not least the closer tie-ups with Amazon.”