Morrisons to Sell Dozens of In-Store Pharmacies in Major Cost-Cutting Drive
Morrisons is reportedly preparing to sell dozens of its in-store pharmacies as part of a significant effort to slash costs and streamline operations. According to reports from the Telegraph, the supermarket chain has identified sites that are not financially profitable and put them up for sale. While the exact number of pharmacies involved has not been disclosed, it is understood that Morrisons will not sell all of its 120 in-store pharmacies, with the sales being conducted on a store-by-store basis rather than as a package deal.
Pharmacy Sales and Rebranding Plans
Those pharmacies that are sold are likely to remain open but will be rebranded under their new owners. This move is part of a broader strategy to reduce Morrisons' substantial debt burden, which stood at £3.1 billion at the end of the 2024-25 financial year. The supermarket, owned by US private equity firm Clayton, Dubilier & Rice, reported a pre-tax loss of £381 million for the year to October 26, largely due to a £281 million interest bill on its debt. However, this loss was narrowed from £414 million in the previous year, indicating some progress in financial management.
Financial Challenges and Cost Reduction Efforts
Morrisons has faced significant financial headwinds, including rising costs from government measures such as the national insurance contributions tax hike and minimum wage rise introduced in the 2024 budget, which added £200 million to expenses. Additionally, a cyber incident just before Christmas 2024 caused an IT systems outage, further straining resources. Despite these challenges, the supermarket managed to cut costs by £233 million in the past financial year and is on track to meet a £1 billion savings target by the end of 2025-26. Underlying earnings, excluding costs like debt interest, remained flat at £835 million.
Workforce and Sales Performance
The cost-cutting measures are not expected to include job losses among Morrisons' 95,000-strong workforce, although the company plans not to replace some workers as they leave. On a positive note, like-for-like sales growth picked up to 3.4% over the Christmas period, driven by strong demand for its own-brand premium range, which saw sales jump by 17.4%. Chief Executive Rami Baitieh highlighted that the company grew like-for-like sales for a 12th consecutive quarter and maintained its market share, despite consumer pressures.
Future Outlook and Strategic Goals
Chief Financial Officer Jo Goff emphasized the company's efforts to offset cost pressures through its cost reduction programme, which has delivered £845 million in savings to date. Morrisons aims to exceed its £1 billion savings target by the end of 2025-26, as it continues to navigate a challenging economic environment. The sale of pharmacies is a key component of this strategy, reflecting a focus on core retail operations while managing debt and improving profitability.
