Morrisons won't be the last supermarket to cut costs: Greg Wright

The announcement that Morrisons has increased its medium term savings target from £700m to £1bn won't have surprised many analysts.

Morrisons had already revealed that hundreds of jobs were under threat of redundancy as it unveiled plans this week to close some of its cafes, convenience stores, florists and fresh food counters.

The closures will see it shut down 52 cafes, all 18 market kitchens, 17 Morrisons Daily convenience stores, 13 florists, 35 meat counters, 35 fish counters and four pharmacies.

The majority of staff members affected by the changes, which will be made over the next few months, are expected to be deployed to roles elsewhere in the business. However, Morrisons confirmed that a total of around 365 employees are at risk of redundancy.

Chief executive Rami Baitieh said the changes were a necessary part of his plans to renew and reinvigorate the chain and invest in areas that customers really value.

On the face of it, the latest quarterly trading update from Morrisons provided Mr Baitieh with plenty of reasons to be cheerful.

Group like-for-like sales were up by 2.1 per cent and total sales increased by 2.4 per cent to £4.0 billion.

The rising sales came despite a wide-ranging cyber attack before Christmas which affected the availability of products in its stores well into January.

In a challenging environment, Morrisons has made exceptional progress in a very short time, according to Mr Baitieh.

But a driven, perfectionist like Mr Baitieh knows he must stay on the front foot in a fiercely competitive market.

During his brief time at the helm, the French Air Force Colonel hasn’t shied away from making tough decisions. He clearly wants to reassure investors that he can deal firmly with any challenges caused by rising costs while focusing resources on elements of the business which are likely to lead to profitable growth.

He said: “In the quarter we delivered a further £56m of cost savings and we expect to deliver the remainder of our £700m target ahead of schedule in the second quarter.

"We are today increasing our target to £1 billion which will help us offset cost headwinds, invest for customers and remain competitive in a fast changing market.”

These cost headwinds, of-course, include increased taxes for employers.

Morrisons was one of more than 70 businesses, including Tesco, Asda and Sainsbury’s, that told the Chancellor in an open letter that changes announced in the Budget mean price rises are a “certainty”.

These unwelcome cost pressures are concentrating minds in boardrooms around the country.

Morrison isn’t the first, and almost certainly won’t be the last, supermarket to increase its cost savings target in response to economic headwinds every CEO could do without.

Greg Wright is the deputy business editor of The Yorkshire Post