Morrisons emerged as one of the clear winners of the credit crunch yesterday as it reported a rise in profits of almost 19 per cent during the first six months of the year.
Britain's fourth-biggest supermarket chain said it had won half a million customers from rivals in the past year, with the strongest gains in Scotland and the South-east of England. Like-for-like sales were up by 7.6 per cent, total turnover rose by 13.5 per cent to £7.1bn and profits before tax soared by 18.5 per cent to £295m, thanks to the lure of its low prices. Marc Bolland, the chief executive, said: "To have grown like-for-like sales by 7.6 per cent in this economic climate is clear testament to the strength of Morrisons' recovery. More shoppers are choosing Morrisons because of our price-crunching deals and our unrivalled fresh offer in store."
Despite the good news, the company's shares fell by 6.11 per cent to 253.75p as questions were asked about the way it had put the performance figures together. The expectation that Morrisons recessionary advantage is already factored into its price also pulled the stock down.
Mike Tattersall, the director of equities at Cazenove, said: "There appears to be little prospect of an upgrade to consensus following the meeting, and confusion around the depreciation charge creates a problem for the shares in terms of the perception of the quality of the earnings and suggests the underlying margin progress in the first half was not as impressive as might have been expected."
In the midst of a general downturn in food retailing, competition in the sector is also likely to become fiercer. Although Morrisons predicts it will continue to outperform its rivals, analysts are not convinced. Nick Bubb, of Pali International, said: "There is concern that the economy will get tougher and the premium players will have to cut their prices, which will ricochet around the whole sector. There has been a phoney price war among the big chains but that may be about to become more serious."
Morrisons is still benefiting from its big marketing push last year, including television adverts starring Denise van Outen, which helped to lift the Bradford-based group after its problematic takeover of Safeway in 2004.
"It has now caught up after the distractions of the Safeway deal, but will be competing with strong rivals who will not just roll over and let them keep on taking market share," Mr Bubb said.