Morrisons'¨sees sales'¨and profits'¨leap after'¨lean years

The Bradford-based supermarket, which is blossoming under chief executive David Potts, said like-for-like sales rose 2 per cent in the second quarter, while underlying pre-tax profit for the six months to July 31 rose 11 per cent to £157m - its first half year profit increase in four years.

The group’s shares closed up 14.5p at 208p as shoppers return to Morrisons in their droves. Transaction numbers rose 4.3 per cent in the three months to July 31.

“We are in the foothills of recovery. Our colleagues played an absolute blinder in the first half and we have gained momentum,” said Mr Potts.

However he said the group still has “a lot of heavy lifting to do”.

“We have done a lot more listening to customers than talking to them,” he said.

“If you provide increasingly good quality at great value for money prices, enveloped by great customer service the word should spread.”

The group said customer satisfaction rates have improved and the group has introduced 4,598 price crunches this year.

More than 178 local products were introduced into stores across Britain and a Yorkshire Tapas range was introduced into 58 stores in Yorkshire.

John Ibbotson, director of the retail consultancy Retail Vision, said: “Morrisons has stopped the rot and started making a profit, in a turnaround that looks more impressive by the day.

“The brand’s current campaign is entitled ‘Morrisons Makes It’, and on this evidence it might just make it after all.

“CEO David Potts’ back to retail basics approach – in which stores have been spruced up, with more local ranges and lower prices – is beginning to pay dividends and tempt shoppers back.

“Morrisons’ return to its roots – of low prices, good value and fresh food – is finally helping it fight back against the discounters.”

Analyst Nicholas Hyett at Hargreaves Lansdown added: “Morrisons are in the process of delivering one of the most impressive self-help fuelled turnarounds out there. A third quarter of like-for-like growth is welcome, coming after years of declines, but that’s really a side show.

“The group is not so much taking a knife to its cost base as a meat cleaver. Targets on both working capital improvements and cost savings have been smashed and extended.“

Turnover edged down 0.4 per cent to £8.03bn in the half year, with like-for-like sales up 1.4 per cent in the six months to July 31.

Mr Potts, who has embarked on a number of measures to reverse years of stagnation at the grocer, said he is planning more improvements.

James Grzinic, analyst at Jefferies, said: “We had pretty hefty expectations for Morrisons interims, and they were beaten across the board.

“Progress in laying the foundations has been strong in recent months given agreements with Timpson, Amazon and Ocado. We expect more news to emerge on this in the months to come.”

Morrisons has signed a new deal with Ocado and a landmark agreement with US online giant Amazon to supply fresh food to its customers.

At the same time the grocer is slashing selected meat and poultry prices by 12 per cent.

All of the big four supermarkets, Tesco, Sainsbury’s, Asda and Morrisons, have been cutting prices to compete with German discounters Aldi and Lidl, which have eroded their market share.

Former Tesco executive David Potts joined Morrisons as CEO in March 2015 with a remit to revive the group after it was hurt by the rapid rise of the discounters in its northern heartlands.