Supermarket giant Morrisons has unveiled a substantial annual pre-tax loss of £381 million for the financial year ending October 26, primarily driven by hefty borrowing costs. However, the retailer simultaneously celebrated a notable resurgence in sales performance during the crucial Christmas trading period, offering a glimmer of optimism amidst financial challenges.
Financial Performance and Debt Management
The UK's fifth-largest grocery chain reported the significant loss after facing a £281 million interest bill on its considerable debt burden. This figure represents a narrowing from the £414 million loss recorded in the previous financial year of 2023-24. On an underlying basis, excluding costs such as debt interest, Morrisons maintained flat earnings at £835 million.
The group, which is owned by US private equity firm Clayton, Dubilier & Rice, successfully reduced its debts by 10% over the year. Nevertheless, it concluded the 2024-25 financial period with a substantial debt pile of £3.1 billion. Since reaching a peak in 2022, Morrisons has managed to cut its overall borrowings by an impressive 46%.
Cost Pressures and Reduction Strategies
Morrisons attributed part of its financial strain to rising costs, exacerbated by measures introduced in the 2024 government budget. These included last April's national insurance contributions tax hike and the minimum wage rise, which collectively added approximately £200 million to the company's expenses during the past financial year.
In response, the supermarket chain implemented a rigorous cost reduction programme, achieving savings of £233 million in the year to October 26. This brings the total savings to date to £845 million, with the company confident of exceeding its £1 billion target by the end of the 2025-26 financial year.
The cost-cutting measures are not expected to involve direct job losses among its 95,000-strong workforce. However, management indicated that the group would not replace some workers as they leave, as part of ongoing efficiency efforts. Additional initiatives include the rollout of electronic shelf price tags to streamline operations.
Festive Trading Performance
Despite the annual loss, Morrisons enjoyed a robust Christmas trading period, with like-for-like sales growth accelerating to 3.4% in the critical six weeks to January 4. This performance was bolstered by strong demand for the retailer's own-brand premium range, which witnessed a remarkable 17.4% surge in sales.
Non-food sales also performed well, increasing by 10% over the festive period, while the clothing range saw a 4.7% uplift. The Christmas sales jump marked a significant improvement compared to trading in the full year to October, where like-for-like sales grew by 2.8%, with growth slowing to 2.4% in the final quarter.
Market Position and Competitive Landscape
Recent industry data from Worldpanel indicates that Morrisons' market share experienced a slight decline over Christmas, dipping to 8.5% in the 12 weeks to December 28, down from 8.6% a year earlier, despite the overall sales increase. This development has raised concerns among market observers, particularly as the gap with rival discounter Lidl continues to narrow.
Experts suggest that if Lidl maintains its current momentum, the German retailer could potentially overtake Morrisons in the coming months, intensifying competition within the UK grocery sector.
Leadership Commentary and Future Outlook
Rami Baitieh, Chief Executive of Morrisons, commented on the results, stating, "In a year when consumers were feeling the squeeze, we grew like-for-like sales for a 12th consecutive quarter, maintained EBITDA, and our market share." He emphasised the company's resilience in facing external challenges, including a cyber incident that caused an IT systems outage just before Christmas 2024, impacting product availability, alongside rising inflation and government cost increases.
Mr Baitieh added, "We had a good Christmas in 2025, providing a solid foundation for the first quarter. As we enter 2026, the grocery market remains competitive, and we are committed to our focus on delivering good value and keeping prices low for customers."
He noted that consumer confidence was still "not at its best" in 2026, with ongoing pressures from government cost increases, inflation, and budget uncertainty weighing on sentiment.
Jo Goff, Chief Financial Officer of Morrisons, reinforced the company's financial strategy, saying, "We worked hard during the year to offset the significant and unexpected cost headwinds arising from the Government's 2024 budget and other inflationary pressures." She expressed confidence in exceeding the £1 billion savings target by the end of 2025-26.
