Morrisons' sales jump as it wins over shoppers from larger rivals

Morrisons, Britain's fourth-largest supermarket chain, trounced its rivals yesterday as it reported booming sales and claimed it was winning over bargain-hunting shoppers from rival stores such as Tesco.

The Bradford-based company said its like-for-like sales, excluding fuel, were up 8.1 per cent in the 13 weeks to 2 November, compared with the third quarter last year. The results beat City forecasts and overshadowed the 2 per cent growth reported by the market leader, Tesco, earlier this week.

Morrisons' chief executive, Marc Bolland, said: "Overall, this is a very strong performance, achieved in a tough economic environment and encouragingly we are continuing to do particularly well in London and the South, and in Scotland too."

The retailer, which struggled after it acquired Safeway in 2004, has re-launched cheaper lines, slashed prices and launched promotions, including a Sunday lunch for four for £4, which it said attracted 250,000 shoppers. It is also benefiting from a television advertising campaign featuring such celebrities as the Top Gear presenter Richard Hammond, Denise Van Outen and the football pundit Alan Hansen.

Mr Bolland said more than half of its sales growth had resulted from new customers. The rest came from existing Morrisons shoppers spending more, as well as food price inflation – which is now falling. "People are not only coming to us – they are also staying," said Mr Bolland. He said 700,000 new shoppers were using Morrisons every week, compared to the 300,000 that Tesco claimed on Tuesday.

The figures are the latest evidence that value-for-money supermarkets have been winning over shoppers from more expensive chains such as Waitrose and Marks and Spencer. The other big winners are Aldi, Lidl and Asda.

Mr Bolland said that while Morrisons' value lines were key to its sales growth, the popularity of its fresh produce and premium own-brand items was also soaring. "People come to us for value but also come to us for fresh," said the Dutchman, who was appointed in 2006.

Morrisons has relaunched several ranges, such as its Meal Deals, which are proving popular. Mr Bolland said: "Our £4 Sunday lunch for four, which was enjoyed by 250,000 customers, was the best family deal in the market. Our Indian Meal Deal for £6 resulted in 230,000 customers choosing to eat at home with Morrisons in preference to a take-away or eating out."

Earlier this week, Tesco denied it was losing market share to Morrisons, but yesterday's figures and recent data from market analyst TNS Worldpanel suggests that Britain's biggest grocery chain is being hurt by Morrisons, Asda and Aldi.

Sainsbury's has reported that its like-for-like sales, excluding fuel, rose by 4.3 per cent in the third quarter, while Asda posted a sales increase of 6.9 per cent over the same period. Yesterday, Asda said it had also enjoyed strong sales in November.

Morrisons revealed it had agreed to buy 38 former Somerfield and Co-operative Food stores for £223.1m, and said the transaction would enhance its earnings in the 2010-11 financial year. As a result of this and other investments, such as a new distribution centre in Kent, it is pausing its shares buy-back programme for the rest of this financial year.