Takeover target Morrisons warned of pressure on prices due to the lorry driver shortage as it revealed that half-year profits tumbled.
The Big 4 grocer, which is at the centre of a bidding battle between two US private equity firms, said it expects industry-wide retail price inflation in the coming months as a result of the HGV driver shortage, global commodity price increases and higher haulage costs.
However, it said it will seek to reduce the impact of the cost pressures and supply issues to keep its shelves stocked.
The news comes as Morrisons posted a 43 per cent fall in statutory pre-tax profits to £82 million for the six months to August 1, down from £145 million from the same period last year.
READ MORE: Morrisons poised for takeover auction
Underlying pre-tax profits fell 37 per cent to £105 million, with the group blaming a hit from £41 million in pandemic-related costs, as well as £80 million in lost profit across its cafes, petrol forecourts and food-to-go.
“We expect some industry-wide retail price inflation during the second half, driven by sustained recent commodity price increases and freight inflation, and the current shortage of HGV drivers,” Morrisons said.
“We will seek to mitigate these and other potential cost increases, such as any incurred to maintain good on-shelf availability.”
The group has received offers for the company from buyout firms Clayton, Dubilier & Rice (CD&R) and Fortress, though it confirmed in the statement that it is recommending CD&R’s offer of 285p per share, valuing the group at £7 billion.
Shareholders will vote on the deal in or around the week of October 18.
But with no final offers yet tabled by either party, Morrisons said on Wednesday that it is in discussions with the Takeover Panel to launch an auction in the hope of bringing to an end the three-month bidding war.
An announcement by the Takeover Panel is expected shortly, with a date for later this month expected to be set when any bidders must make their offers final.
The retailer’s half-year results showed that like-for-like sales, excluding fuel and VAT, fell 0.3 per cent, having fallen 3.7 per cent in the second quarter against a 2.7 per cent rise in the first three months.
The group stuck by its profit guidance for the full year, of underlying pre-tax profits including business rates paid to be higher than the £431 million it made the previous year, excluding the £230 million of rates relief that was waived.
It expects the second half to see lower lost profits, “minimal” direct costs related to the pandemic and efforts to mitigate price inflation in its supply chain.
Morrisons chairman Andrew Higginson added: “Across the business the whole Morrisons team has shown commendable resilience facing into a variety of continuing challenges during the first half, including the ongoing pandemic, disruption at some of our partner suppliers, and the impact on our supply chain of HGV driver shortages.”
with PA Wires