Sales of fuel and food-to-go have surged at supermarket group Morrisons in recent weeks as easing lockdown restrictions have fed through into consumers’ spending patterns.
Fuel volumes in early May reached their highest since March 2020, and were almost back to pre-pandemic levels. Meanwhile, the group shifted more of its £3 “meal deals” than in any of the previous 15 months.
For the whole of the 14 weeks to May 9, fuel sales were up by 17.5 per cent, contributing to a 5.3% rise in total sales. On a like-for-like basis excluding fuel, sales in the first quarter were 2.7% higher.
During the pandemic, supermarkets have seen profits eroded as spending by commuters and office workers on higher-margin ready meals has fallen in favour lower-margin staple foods. And while fuel sales generate little profit, they provide significant working capital because drivers pay cash for fuel that is bought from suppliers on credit.
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Striking an upbeat note, Morrisons predicted its net debt will fall and is maintaining its guidance that year-end profits will be higher than the £431 million it would have achieved last time around had it not returned £230m of business rates relief provided through government Covid support programmes.
“The pandemic is not yet over, but it is in retreat across Britain and there is much to be positive about as something approaching normal life begins to take shape,” chief executive David Potts said.
“Our forecourts are getting busier, we are seeing encouraging recent signs of a strong rebound in food-to-go, take-away counters and salad bars, and our popular cafes will soon fully reopen. The nation has a summer of socialising and sport to look forward to and we’ll be able to rediscover the joys of meeting up and eating well together.”
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Direct Covid costs linked mainly to extra worker absences and more marshals during the lockdown at the start of the year came in at £27m. Last year, Morrisons’ profits halved to £201m as it incurred £290m of extra costs because of the pandemic, wiping out gains from an increase in sales.
Online sales surged during the first quarter, up 113% on the same period a year earlier. The group said both Morrisons.com and Morrisons on Amazon are “now complementing our supermarkets well”.
Following the extension of its partnership with the McColl’s convenience store chain announced earlier this year, Morrisons has in recent weeks started supplying an extra 230 McColl’s stores. It has also agreed several other new supply arrangements, including one with Scottish forecourt retailer Highland Fuels.
Following its trading update, shares in Morrisons closed yesterday’s trading a fraction lower at 182.35p.
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