UK retailer Morrisons has repaid a further £200 million (€239.4 million) worth of debt and extended the group’s term loan facilities from 2027 to 2030 alongside its revolving credit facility (RCF) to 2030.
The retailer's total debt has reduced to £3.8 billion (€4.6 billion) in the current financial year from £6.2 billion (€7.4 billion) following its acquisition by Clayton, Dubilier & Rice (CD&R) in 2022.
In this period, Morrisons disposed of its fuel activities to the private equity firm’s co-owned Motor Fuel Group and explored selective store disposals.
Moody's has upgraded Morrisons’ debt status from B2 to B1 and its view from 'negative' to 'stable'.
'Modest Room For Manoeuvre'
Shore Capital said in a note, 'Within the store, our visits show a Morrison that is seeking to be more competitive, Mr.Baitieh has brought focus, energy, and theatre to the firm within the most constrained inherited contexts, for which he deserves considerable credit in our view.
'With the aforementioned debt management activities, Morrison has that little bit more resource to seek to be competitive be that price and promotions, marketing, in-store hours and loyalty, albeit has modest room for manoeuvre compared to the likes of Tesco and Sainsbury.'
The investment firm added that Morrisons’ debt to EBITDA ratio stands at c3-4x and is particularly elevated compared to its listed UK trading peers.
The retail chain 'remains notably vertically integrated', where the group has seen clear successes in third-party trading.
'More broadly, we sense Morrison is a key beneficiary of what is poor delivery at this time by Asda, a visit to most stores is not an edifying experience.'
The investment firm added that 'Morrisons is much more stable and showing signs of iterative improvement, which means we are a little more confident that it can trade positively through toughening H2 CY24 comparatives in 2025, noting the growing likelihood of elevated UK food inflation on the back of the British Government’s mandated rise in labour costs through the National Insurance Contributions, National Living Wage and Employment Bill.'
