How top 3 FTSE supermarkets are handling the HGV driver shortage

Highlights 

• Shortage of truck drivers in the UK could last for a year, impacting the UK’s supply chain ahead of the Christmas festive season.
• Because of driver shortage in the past few months, companies that can pay more are taking away drivers from small businesses.
• Tesco Plc, Marks and Spencer Group Plc and Morrison (WM) Supermarkets Plc have been adopting different measures to tackle the supply crunch.

Shortage of truck drivers in the UK could last for a year, impacting the UK’s supply chain not only ahead of the Christmas festive season but beyond that as well. The cautious view on the industry was given by Duncan Buchanan, policy head of Road Haulage Association, a trade association dedicated to commercial transport of goods in the UK.

The UK continues to face an HGV (Heavy Good Vehicle) drivers’ shortage due to a combination of factors like change in immigration rules following Brexit, increased demand and other factors. The UK government has taken certain measures to deal with driver shortage like apprenticeships to learn heavy goods vehicles and temporary visa schemes to attract foreign truck drivers and poultry workers to the UK. But such support by the government is not having an immediate impact as it takes up to three weeks to process visa applications.

Because of driver shortage in the past few months, companies that can pay more are taking away drivers from small businesses and essential suppliers. As a result, the average wage of drivers in the UK rose by 10% to 20% in the last six months. Also, some businesses are working out new contracts to pass on the high cost to customers.

Let us explore how the top supermarkets listed on LSE are tackling the driver shortage situation:

Tesco Plc (LON: TSCO)

The company operates the supermarket chain and fuel stations in the UK and other countries. It is one of the largest companies in the UK’s retail segment. The company reported revenue of £30,416 million, a rise of 5.9% in the 26 weeks ended 28 August 2021 despite facing supply chain challenges due to HGV drivers and labour shortage.

The company’s fuel sales were at £3,085 million during the period which remains low compared to pre-pandemic levels. To overcome the lorry driver shortfall, the company is offering £1000 as a joining bonus to drivers.

Tesco Plc’s current market cap stands at £21,204 million as of 20 October 2021. In the last one year, the stock has given 30.13% returns to its shareholders.

Marks and Spencer Group Plc (LON: MKS)

The company operates as a diversified retailer offering various products like clothes, foods, and many other products across its stores. The company reported £9,166 million in revenue for the financial year ended 3 April 2021.

The company has offered a sign-on bonus to new drivers and additional retention payment of up to three months to cope with the lorry driver shortage. Also, the company will be offering discounts and pension services to drivers along with training and career development schemes.

Marks and Spencer Group Plc’s current market cap stands at £3,597 million as of 20 October 2021. In the last one year, the stock has given 97.25% returns to its shareholders.

Morrison (WM) Supermarkets Plc (LON: MRW)

Bradford-based supermarket chain operator was in the news in recently for its £7 billion takeover by US-based private equity firm Clayton, Dubilier & Rice (CD&R). The company has received shareholder approval for the acquisition.

The company has been facing supply chain disruption at its supermarket chain along with high competition from rival German companies. It has already warned that supermarket prices will rise due to the driver shortage. Earlier it had closed the independent retailers’ wholesale accounts to tackle the driver shortage situation and is now putting all efforts to keep its shelves stocked.

Morrison (WM) Supermarkets Plc’s current market cap stands at £6,898 million as of 20 October 2021. In the last one year, the stock has given 66.48% returns to its shareholders.