Coronavirus supplier payments cost Morrisons £50m

Morrisons’ commitment to pay suppliers immediately to support them throughout the coronavirus pandemic cost the supermarket £50m. 

In March, the supermarket announced it would temporarily speed up payment times for 3,000 of its small suppliers and farmers to support cash flow. 

Small suppliers were also temporarily re-classified from those with up to £100,000 of business-a-year with Morrisons, to those with up to £1m. 

In results for quarter one, the retailer said the new payment terms would amount to a “temporary working capital investment of £50m”. It is due to review the temporary payment terms at the end of May.

Morrisons said: “Throughout the period our manufacturing businesses and supply chain coped well, often under extreme pressure, with the unprecedented volatility of demand, colleague absences, and the challenges of so many new initiatives.”

The retailer said trading in the 14-week period from 3 February to 10 May was up 5.7%, excluding fuel, compared to the same period in 2019.

It noted the pandemic had created challenges, such as panic buying, that forced it to change both its near-term priorities and how it operates. 

“All our efforts are currently focused on protecting our colleagues and customers, and working together with our own food makers and our other suppliers to ensure food is available to all across Britain, especially the vulnerable and most in need,” it said.

“At this stage, the impact of Covid-19 remains uncertain. The outlook for our sales is also uncertain, although we are adapting well to the new day-to-day circumstances while being both proactive and reactive in taking new opportunities.”

Morrisons added it is confident it can satisfy “any ongoing increased demand if the eat-at-home market continues to be temporarily larger than usual”, but noted it is operating in a more volatile – and costly –  trading environment. 

“In addition, many of the payroll, bonus, seasonal waste and markdown, distribution, community, and colleague and customer protection initiatives described above come at considerable cost. For example, at times we have been experiencing temporary absence rates running at up to 20,000 colleagues,” it said.

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