By Kristy Dorsey

Morrisons has reported a surge in online grocery sales, but a collapse in demand at its fuel forecourts and an increase in costs to protect people from Covid-19 weighed on the grocer’s first quarter results.

The UK’s fourth-largest supermarket chain posted a 5.7% rise in same-store food and merchandise sales during the 14 weeks to May 10, boosted by a “substantial” increase in online and food box deliveries. The company has doubled the number of delivery slots available during the coronavirus lockdown, with sales on its site likewise doubling to £1 billion on an annualised basis.

But with fuel included, same-store sales fell by 3.9%. The Bradford-based group said fuel revenues were down by more than 39% during the quarter, led by a 70% plunge since lockdown came into effect in March.

Morrisons has nearly 500 stores throughout the UK, including 60 in Scotland. Earlier this week, it became the first major retailer to slash petrol prices to less than £1 per litre, marking the first time that fuel has been “sold nationally” at that level in more than four years.

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The company has taken on 25,000 extra staff to help with demand both in stores and online, as well as to cover for higher than usual absences. Costs from additional recruitment, increased delivery services, protective kit, staff bonuses and other virus-related measures are expected to amount to approximately £230 million.

This will broadly be offset by the reduction in business rates payments introduced by the Government as part of its wide-ranging package of support during the crisis. However, Morrisons cautioned that the actual net effect “is highly dependant on the length of the crisis and how customers respond as lockdown eases”.

With “minimal certainty or visibility” on sales or profits for the current year, Morrisons is continuing to delay a decision on a planned £100m special dividend for shareholders.

Like others in the sector, Morrisons experienced a surge in demand from early to mid-March as UK consumers made almost 80 million extra shopping trips during the month. Nearly £2bn extra was spent on food and drink compared to the same period a year earlier, setting an industry record for monthly grocery sales.

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But thereafter, Morrisons said its sales were hampered by reduced trading hours and the introduction of social distancing measures with the start of lockdown. Sales during Easter were down on the previous year.

But trading has improved more recently, with like-for-like sales up by 9.6% in the last two weeks of the quarter.

“In the most recent weeks, we have gradually returned to normal trading hours, introduced more protective screens to enable all checkouts to open safely at the same time, and availability has continued to improve,” said the company, which is led by chief executive David Potts.

“Customers have become more accustomed to the social distancing protocol in stores, and are spreading their shopping trips throughout the week rather than focusing on the traditional weekend peak.”

The group is preparing to introduce the same-day delivery service that it runs with Amazon to dozens of additional stores by the end of this month, and is rolling out a click-and-collect service at 280 shops by mid-June. It has also set up a telesales service so that vulnerable shoppers who do not have access to the internet can order home deliveries from a local store.

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Home delivery for customers has been further extended with the introduction of pre-prepared food boxes which are being delivered direct to customers’ houses by courier. Ten different boxes have been introduced so far, with options such as gluten free, BBQ and Ramadan.

Furthermore, Morrisons has formed a partnership with Deliveroo to deliver groceries in as little as 30 minutes to customers by courier from 130 Morrisons stores. This service is “proving popular”, the company said, and will be extended to more deliveries and items, including a selection of beer and wine.

All staff who want them have been provided with free protective equipment. To date, just over 200 Morrisons employees have tested positive for coronavirus.

“We are facing into the unprecedented current challenges and are playing our full part to help feed the nation: working with determination, creativity and pace to serve customers as well as we possibly can,” Mr Potts said.

“The professionalism, enthusiasm, and resourcefulness of our frontline key worker colleagues is extraordinary and is showing Morrisons at its very best. I’d like to thank every single colleague: you are Morrisons’ most important and most valued assets and are making a vital difference to so many people and communities across Britain.”