Key Takeaways:
- Morrisons reported flat core earnings for its 2024/25 year due to higher costs
- Revenue rose 3.2% to 15.8 billion pounds despite increased costs
- The company’s ‘The Best’ premium own label range saw a 17.4% jump in sales over the Christmas period
- Morrisons continues to underperform its rivals, including Tesco and Sainsbury’s
- The company’s debt has been reduced by 46% from its 2022 peak
Introduction to Morrisons’ Financial Performance
Morrisons, the UK’s fifth largest grocer, has reported flat core earnings for its 2024/25 year, citing higher costs as the primary reason for this outcome. The company’s underlying earnings before interest, tax, depreciation, and amortization (EBITDA) remained static at 835 million pounds ($1.1 billion) for the year ending October 26, despite a 3.2% increase in revenue to 15.8 billion pounds. This suggests that the company’s efforts to drive sales growth have been offset by rising costs, which have put pressure on its bottom line.
Impact of Higher Costs
The earnings outcome was attributed to a 200 million pounds increase in costs, resulting from the UK government’s 2024 budget, the impact of a cyber incident in the first quarter, and higher than expected inflation. These factors have combined to erode Morrisons’ profit margins, making it challenging for the company to achieve significant earnings growth. The cyber incident, in particular, highlights the risks associated with operating in a digital landscape, where companies are vulnerable to cyber threats that can disrupt their operations and result in significant costs.
Christmas Trading Performance
Despite the challenges faced by Morrisons, the company reported a strong Christmas trading performance, with like-for-like sales growth rising to 3.4% in the six weeks to January 4. This was driven by a 17.4% jump in sales of Morrisons’ ‘The Best’ premium own label range, which suggests that the company’s efforts to invest in its own-brand products are paying off. CEO Rami Baitiéh noted that the company had a "good Christmas" in 2025, providing a solid foundation for the first quarter. This positive momentum is encouraging, but it remains to be seen whether Morrisons can sustain this performance over the longer term.
Comparison with Rivals
Industry data published earlier this month showed Morrisons continuing to underperform its rivals, including Tesco and Sainsbury’s, as well as discounters Aldi and Lidl. Tesco and Sainsbury’s published robust Christmas trading updates earlier this month, highlighting the competitive nature of the UK grocery market. Morrisons’ struggles to keep pace with its rivals are a concern, as the company needs to find ways to differentiate itself and attract price-conscious consumers who are increasingly turning to discounters for their grocery needs.
Debt Reduction
One positive aspect of Morrisons’ performance is the reduction in its debt levels. The company’s debt is down 46% from its 2022 peak, which provides a more stable financial foundation for the business. This reduction in debt will help Morrisons to reduce its interest payments and free up resources for investment in its operations and marketing initiatives. However, the company still faces significant challenges in terms of driving sales growth and improving its profitability, and it will need to find ways to address these issues in order to achieve long-term success.
Conclusion
In conclusion, Morrisons’ flat core earnings for its 2024/25 year reflect the challenges faced by the company in a highly competitive UK grocery market. While the company’s Christmas trading performance was encouraging, it continues to underperform its rivals and faces significant pressure on its profit margins. The reduction in debt levels is a positive development, but Morrisons will need to find ways to drive sales growth and improve its profitability in order to achieve long-term success. As the UK grocery market continues to evolve, Morrisons will need to adapt and respond to changing consumer trends and preferences in order to remain competitive.
