Morrisons was the FTSE 100’s highest climber after the supermarket chain reported its third consecutive quarter of sales growth.
Sales, excluding fuel, at stores open for more than a year rose 2% in the three months to the end of July, more than double the rate analysts had predicted. This helped lift underlying half-year profits at Britain’s fourth largest grocer by a better-than-expected 11% to £157m.
Total sales slid 0.4% to just over £8bn, with Morrisons saying it had shut down stores equivalent to nearly 5% of its total space. The closure of loss-making stores helped boost profits and led to Morrison’s first rise in sales at its physical outlets since 2012.
Morrisons finished the day as the biggest riser on the FTSE 100 on Thursday morning as investors reacted positively to its first-half results, with shares up 7.5% to 208p.
The retailer said it also expected cost savings to exceed its £1bn target by the end of 2016-17 after it cut head office jobs, rejigged its pensions scheme and made lots of small efficiency savings.
David Potts, the chief executive, said: “We are still in the foothills of our recovery programme. We’ve returned the business to core customers and sped the business up. We’re pleased with progress so far and there’s a lot more we can do and will do for customers and colleagues but so far so good.”
The Bradford-based business said it was too early to know how the EU referendum result would affect the British economy, but “customers tell us their food shopping has not changed. We have seen no negative impact on customer sentiment or customer behaviour.”
However, it warned of some uncertainties, especially on the price of imported food, if sterling remained at its current lower level against the euro and the dollar.
Potts said that whatever the rise in costs and economic impact of the Brexit vote, it fell to Morrisons to “become increasingly competitive in the sector regardless of the prevailing circumstances”.
Morrisons’ strong sales performance comes after two rounds of price cuts in recent months. Earlier this month it trimmed prices on nearly 160 products by an average 12%, just a month after cutting the price of more than 1,000 products, including toiletries and seasonal fruit and vegetables, by an average of 18%.
Potts added that introducing more takeaway foods and placing them in handier positions near its supermarket entrances. Potts said sandwiches had probably been the group’s top performing area, with sales of ready meals up 9% after it improved quality and reduced prices.
Before Christmas, the chain will double the range of its premium The Best range and also attempt to reduce costs with new initiatives including the installation of rapid self-scan tills that handle a trolley of shopping via a conveyor belt, without the need for a staff member.
Morrisons has begun selling fresh and frozen food via Amazon as well as through its own website. During the six-month period, Morrisons said it had made £5m of additional profit from wholesaling food to Amazon and its petrol forecourt’s partner Motor Fuel Group as well as new services, interest and online improvements.
Potts said there was still room to introduce new services that would help attract people to Morrisons stores. The group recently installed about 100 Amazon collection lockers at it stores and now plans hundreds more. It also wants to bring in other online collection services including Doddle and InPost as it tries to find a way to exploit the rise in online shopping.
