Apr 5, 2022

When you are desperately hoping to kickstart a refinancing of more than £6bn of debt, telling the City to brace itself for more misery might seem like a strange way to go about it. However, yesterday’s under-the-radar announcement by Morrisons of its none-too-spectacular 13-week results to 10 January  – a marked contrast to how the supermarket used to report before being taken over by private equity – was a crucial step in a process that’s increasingly vital to its new owner’s hopes. Sources told The Grocer the release of the results (albeit abbreviated) had “cleared the way” for Clayton Dubilier & Rice (CD&R), spearheaded by former Tesco boss Terry Leahy, to finally get its refinancing plans on the road. The process had been in danger of stalling amid testing market conditions and the CMA’s claim that the takeover could lead to higher prices at the UK’s petrol pumps, which is expected to be solved with the sale of forecourts in the 121 locations named by the watchdog. Now Morrisons has published its latest results – albeit none too positive ones, with sales down more than 6% – CD&R is obviously confident it can begin talks with the bankers in earnest . It’s hopeful investors will accept there are tough comparisons to be made with the year of the pandemic. Yesterday’s statement, low-key as it was, also makes clear just how vital it will be for Leahy and co to succeed in their refinancing mission. There are tough times ahead for the grocery sector, and there is concern the debt currently piled in the deal is leaving Morrisons hamstrung in its battle against the big four supermarkets and discounter rivals. Right now, Morrisons is in danger of becoming the laggard of the bunch. The latest Nielsen figures , out today, show its sales are down nearly double digits year on year. In comparison, sales at the best performer Tesco were down just 3.5%, despite the comparisons with the pandemic period. Morrisons, which impressed so much in its handling of the pandemic, was even outperformed by a CEO-less Asda. According to Nielsen’s head of retailer and business insight Mike Watkins, the figures show consumers are turning en masse to supermarkets with cheaper own-label lineups and prices that are comparable to Aldi and Lidl. Morrisons has pledged to keep prices low for around 2,000 ‘customer favourites’, but it has nothing like the strong footing in this field enjoyed by some of its rivals – and the Issa brothers have stolen a march with their ‘Just Essentials’ range in the wings. Meanwhile, fresh reports suggest Morrisons’ new owners are also looking to beef up their war chest with the sale of a £500m portfolio of manufacturing and distribution facilities. It was also forced to rule out a sale and leaseback strategy for its stores amid pressure from investors in the race to buy the supermarket. It will be fascinating to see what other rabbits they can pull out of the hat to get Morrisons back on the front foot. Right now it’s not about private equity making money from Morrisons, but showing they can invest enough to stop it being left behind. Topics