Morrisons beats the gloom

Supermarket chain Morrisons today said its value ranges had helped it bring in half a million more customers every week as hard-pressed shoppers looked to cut food bills.

The firm, which relaunched cheaper lines and slashed prices on several everyday items to 50p, said like-for-like sales excluding fuel rose 7.6 per cent in the 26 weeks to August 3.

This improves on the 7 per cent growth seen in the first quarter, as shoppers looked harder to find the better deals amid fierce competition in the sector.

"During the period the slowdown in the economy inevitably led to a focus on value," Morrisons said.

Underlying profits at the UK's fourth biggest chain rose 19 per cent to £295 million in the first half, in line with City forecasts.

Morrisons and Asda - as well as discounters such as Aldi and Lidl - have been the main beneficiaries so far as shoppers are squeezed by rising bills.

The Bradford-based chain's promotional activity comes despite increasing pressure on supermarkets from soaring raw materials costs.

Morrisons said that as of the end of July, the cost of crude oil was 66 per cent above a year earlier, wheat up 23 per cent while rice prices had more than doubled.

Although the fierce competition between supermarkets meant it could not pass on all increases to customers, the group remains on track to hit profit targets this year despite the toughest trading environment for years.

"We fully expect the second half to be highly competitive as disposable incomes come under further pressure, and we will continue to use our sales momentum to fund price investment and maintain a strong competitive position," the group said.

Meanwhile Morrisons has completed the rebranding of its stores under a turnaround plan led by chief executive Marc Bolland, following the problems caused by its takeover of Safeway in 2004.

Mr Bolland added the results were a "clear testament to the strength of Morrisons' recovery".