Since joining the business as chief executive in November 2023, Rami Baitiéh can be more than happy with what he’s achieved in that time. But does the Budget threaten to sink that turnaround?
Morrisons has issued financial results for the fourth quarter and its full financial year. Underlying profits for the full year soared 11.2% to £835m, while group like-for-like sales for the period were up 4.1%.
Baitiéh said the year had been one of “real change, urgent reinvigoration and positive progress” for the business. Despite the impressive performance, the turnaround hasn’t been entirely smooth sailing – exemplified by an IT glitch over Christmas that hammered availability and its membership schemes.
Above all, despite the brand making great strides, the spectre of the Budget and its associated costs is looming large in Baitiéh’s mind.
Only last week, the brand slashed 200 jobs, coming days after Baitiéh lashed out at the “avalanche of costs” hitting businesses from April.
Baitiéh faced questions about whether the nascent turnaround of the business is under threat from the Budget, whether more job cuts will be needed in future to balance the books, and what impact the tech issue will have on its first quarter.
Are you worried that the cost increases in the Budget are going to blow your turnaround off course?
“I wouldn’t say I’m worried but it’s a serious matter. Unwelcome, for me and all the other retailers. We shared our concerns with the government and we asked for some fair adjustments. On some lines, we agreed and were happy − on wages for example. But on other lines, we shared our concerns and we asked for some possible adjustments.
“In the meantime, we needed to sit down and say if this is all confirmed and maintained, what are the internal actions that we can take without inflating prices – because we know what the consequence of that would be – without impacting our employment and immediate decision making.
“We’ve had to work incredibly hard on our internal processes and our supply chain processes. In retail. In the supply chain. On efficiency and productivity. We know at Morrisons we still have a lot of work to do on them and we shall see whether, over the next couple of weeks and months, the work that we’ve done on that will be sufficient to offset the additional costs.”
Can you rule out any further job cuts in the coming weeks and months?
“Cost savings are a part of our culture [at Morrisons]. Over the last two years, we’ve been managed to save over £600m in terms of cost savings and productivity. So, this is like a daily shower for us.
“With the added costs, we actually need to accelerate this, and we have already identified within our teams and areas inside the company and our supply chain process where we may have links.
“If we take every single link and work on it, we find that we can have some improvement and we can improve our efficiency in line with what we have already been able to do with the £600m in savings I’ve already spoken about.
“However, this is a process and one we’re still working on. We might find that we need to take other actions in the coming two, three or maybe six months. Where we sit today, we believe that the actions we’ve already taken on efficiency, productivity and the supply chain will be helpful for us.”
Could you look to follow Asda’s decision to remove its discounter price match as a way of saving money?
“In terms of value, we are committed to having the best price in the market. The best promotions. The most efficient and strongest and most relevant promotions, and a great loyalty programme.
“All of these things have helped us in the last year to get back our customers. That’s why the switching data last year showed a very positive trend towards Morrisons. We believe in our strategy. We believe in our price match and in our everyday low prices.
“We are committed to sticking to our strategy because the customers I listen to every day are happy with what we are doing with regards to price. So, let’s stick to it.”
Could you describe what happened with the IT issues and Blue Yonder, what the financial impact of that was and what you’re doing to manage the issue?
“The Blue Yonder issue happened in November, our third week of the new financial year. It had a direct impact on our availability as the stock of fresh and produce mainly was not visible to us for a couple of days.
“The teams worked very hard and they were really amazing. They worked to build the system again from scratch and they were able to do that in less than four days – which is absolutely a record.
“But these four days had an impact on our availability and, as we speak today, our availability is better than at the end of last year but we’re still working to get back to the best levels we saw last year.
“We are bouncing back and in very good shape. We’re getting there. Much better than last year but we haven’t yet achieved our best availability level with all the disruption this brought for the company.
“You’re going to see that in the sales line when we announce our quarter-one results.”
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