Morrisons beats rivals with sales 6.5 per cent up in festive trading

The Bradford-based group said the like-for-like sales rise, excluding fuel, came after stores attracted a record number of customers over the six weeks to January 3.

Morrisons – whose chief executive Marc Bolland was poached by Marks & Spencer in November – beat the 4.9 per cent sales growth reported by market leader Tesco and the 4.2 per cent posted by Sainsbury's, although Asda has yet to report numbers.

But Morrisons added to the cautious 2010 outlook for retailers as it said the group continued to believe the market would remain "challenging".

Morrisons has been reaping the rewards of a turnaround plan led by Mr Bolland in recent years but his departure leaves a cloud of uncertainty around the UK's fourth biggest supermarket.

Mr Bolland is on gardening leave after his shock announcement last year and the two companies are still wrangling over a departure date.

He is locked into a year's notice period until November, but negotiations are continuing over an early exit "compromise agreement", according to the group.

Yesterday, Morrisons chairman Sir Ian Gibson said: "These decisions are between us and him and are confidential."

He added that the search for Mr Bolland's successor was "progressing well and to our expectations".

Christmas sales for the group showed strong demand for party food, with sales of products such as canapes and sausage rolls up 90 per cent, while it confirmed the trend to "trade up" seen by many of its rivals.

But Morrisons said it did not believe consumers would continue switching to premium lines for their weekly shop throughout 2010, with an expected squeeze on spending over the year ahead.

Finance director Richard Pennycook said: "Consumers have enjoyed their Christmas, but I don't think it's going to change the fact that value will continue to be at the forefront," said .

He added: "People will continue to have some pressure on disposable incomes and we are planning for 2010 to be similar to what we have seen in the last 18 months."

The Christmas sales performance helped Morrisons to steal greater market share over the period, up from 11.8 per cent a year ago to 12.3 per cent, according to recent figures from research firm TNS Worldpanel.

But the 6.5 per cent growth marked a slowdown on last year's 8.2 per cent rise, reflecting the easing in food price inflation that is depressing sales increases across the sector.

Morrisons – whose Christmas adverts featured celebrities Richard Hammond and Denise Van Outen – said the number of festive promotions this year was higher than the previous year.

Promotions like a voucher which gave a 25 reward to customers who spent more than 40 on each of five shopping trips in the run-up to Christmas were popular.

Shares fell nearly two per cent yesterday amid disappointment that the festive trading performance failed to result in earnings upgrades but some analysts were impressed with Morrisons' performance.

John Kershaw, BofA-Merrill Lynch analyst, said in a research note: "The Christmas vouchering scheme has undoubtedly helped and there will likely be associated margin investment in what was a promotional Christmas."

Justin Scarborough, analyst at Royal Bank of Scotland, added: "Morrisons has increased its sales by nearly 40 per cent over Christmas, which is unprecedented and shows, in our view, just how well the group's strategy is clearly working."

He added: "News of a new CEO will come in due course, with the process ongoing, but Morrison's strategy, in our view, puts it in a position for future and profitable growth."

Morrisons began life as a market stall in 1899. It now has 422 stores and around 120,000 staff.

It has been one of the few winners of the recession as one million new customers have flocked to its stores in search of a bargain.

Non-executive director named

Morrisons appointed Johanna Waterous as a non-executive director of the group yesterday.

Ms Waterous, who will take up her position on February 1, is currently a non-executive director of RSA Group and Sandpiper CI, as well as being an operating partner of Global Leisure Partners.

Her previous experience includes 22 years with McKinsey and Co, London, ultimately as co-leader of the firm's global marketing and sales practice.

She is a non executive director of the Kew Foundation and of Royal Horticultural Society Enterprises and a Trustee of English National Opera.

Sir Ian Gibson, non-executive chairman of Morrisons, said: "I am pleased to welcome Johanna to the Morrisons board. Her all-round business experience and particular expertise in the retail field will contribute further to our strong senior team."

Ms Waterous added: "I am looking forward to working with the great team at Morrisons, and to returning to the fast-paced world of UK grocery retailing."