High Gearing and Falling Profits and Market Share | A Recipe for Trouble at Morrisons?

Sarah Butler's detailed analysis of business case studies are always worth a read. And this new piece on the strategic challenges facing supermarket chain Morrisons is packed with business gold for students.

Sarah writes here in The Observer on whether Morrisons' private equity (venture capital) owners are "tearing the heart out of the business", or about to.

Having clearly overpaid when it spent £7bn in 2021 to buy Morrisons, US private equity firm Clayton, Dubilier & Rice (CD&R) needs to find a way to improve profits and cash flow in order to service the huge debts used to finance the takeover.

Despite rampant food price inflation, Morrisons sales have actually been falling recently, which implies a fall in its market share. It is finding it hard to compete with the likes of Tesco, Aldi and Lidl, whilst at the same time grappling with the challenges of rising wage demands and energy costs.

Rising interest rates also add to the cost of that huge debt.