Morrisons warns of 'significant cost pressures' as sales growth slows and market share slips
Chief executive Rami Baitieh says consumers are 'feeling the squeeze' as the grocer pursues £1bn of cost savings amid higher taxes and new levies
Morrisons said sales growth slowed in the latest quarter and warned of mounting cost pressures after the Autumn Budget, as the supermarket pursues £1 billion of cost savings to protect margins and support shoppers facing squeezed household budgets.
Chief Executive Rami Baitieh said sales for the three months to July 27 grew 3.5% to £4 billion, down from 4.2% growth in the prior quarter, and that government measures introduced since the start of the financial year had created “significant cost headwinds.” He said the business was working to help customers manage stretched household budgets while addressing those additional costs.
Morrisons reported it made £63 million of cost savings in the quarter and reiterated a target to reach £1 billion of cumulative savings by the end of the financial year. The retailer earlier this year cut about 365 roles across cafes, convenience stores and food counters as part of measures to reduce operating costs.
Industry data from NIQ showed Morrisons’ share of the grocery market fell to 8.5% for the three months to Sept. 6, down from 8.8% in the same period a year earlier. The decline underlines the recovery challenge for the Bradford-based chain since it was bought by private equity firm Clayton, Dubilier & Rice in October 2021.
Baitieh pointed to specific policy changes that have increased costs for supermarkets, including a rise in employer National Insurance contributions and a new packaging levy. He said some of the incremental impacts of the Autumn Budget and other government legislation were unexpected when the company set its plans for the year.
In response to intense competition and a tight consumer environment, Morrisons has cut prices on around 650 everyday items and has highlighted measures to shield customers from higher costs. The company said it continued to balance price cuts and investment in its fresh-food offer with efforts to improve efficiency and reduce overheads.
The comments echo warnings from other grocery executives about consumer strain. Aldi UK’s chief executive recently said shoppers were still "finding things difficult," reflecting a broader slowdown in retail spending as households contend with rising costs.
Analysts say supermarkets are navigating a complex mix of weaker consumer demand, higher input and compliance costs, and intense price competition. Morrisons’ recent moves on pricing and headcount are part of a wider industry response that also includes promotional campaigns and cost-reduction programmes.
Morrisons did not provide full-year profit guidance in its quarterly update but underscored its ambition to reach the £1 billion savings milestone within the current financial year. Management will face scrutiny from investors over whether price cuts and structural savings can offset the headwinds from government policy and lower growth in comparable sales.
Morrisons’ performance and strategy will be watched closely as the holiday trading period approaches and as policymakers and retailers assess the near-term outlook for household spending. The retailer’s ability to combine price competitiveness with cost discipline will be central to its effort to regain market share and stabilise margins.