Morrisons proves it is leader of the pack in a tight market

The Bradford-based retailer recently emerged as the strongest performer of the big four supermarkets, according to market data from researchers Kantar Worldpanel.

Its figures showed a four per cent rise in sales at the supermarket chain in the 12 weeks to April 17, beating sales gains at its rivals Tesco, Sainsbury’s and Asda.

Morrisons was also the only one of the big four to report a market share gain, which edged up to 11.9 per cent from 11.8 per cent in the same period of 2010.

Leeds-based Asda’s sales grew 2.2 per cent year-on-year, but its market share slid from 17.6 per cent to 17.4 per cent.

Tesco recently highlighted the impact of a consumer slowdown and intense competition when it reported a 0.7 per cent drop in its fourth quarter sales, while Sainsbury’s has already prepared the market for a tough 2011.

Kantar’s research made grim reading for the sector as a whole, with grocery sales rising by 3.6 per cent – which implies a negative result when grocery inflation of 4.3 per cent is stripped out.

Analysts expect quarterly sales at Morrisons to better the decline seen at larger competitor Tesco, albeit with marginal growth.

Andrew Porteous at Evolution Securities is pencilling in like-for-like sales growth of one per cent excluding VAT, which implies negative volumes after inflation.

He said Morrisons’ Fuel Britannia petrol offer was a canny move, with customer pockets hit hardest by soaring fuel costs.

Clive Black at Shore Capital stockbrokers said the group may also be benefiting as shoppers trade down, given the chain’s value credentials.

“Stripping out fuel and VAT we expect low single digit like-for-like sales (circa one per cent) with the prospect of still negative food volumes,” he said.

“Self-help is probably more important than ever in supporting Morrisons’ margins and full-year expectations.”

However, the supermarket’s sales performance has been overshadowed so far this year by its chief executive’s plans for the firm.

Dalton Philips pledged to launch an online shopping operation within two years when he updated on strategy alongside unveiling annual results.

It has earmarked £3bn in investment over the next three years to catch up with web-savvy rivals.

In February it took its first step into internet retailing with the £70m purchase of online baby products seller Kiddicare.

The group is also upping the ante in the convenience store sector – a plan that has put the group firmly in the spotlight as a potential bidder for frozen food chain Iceland, which is reportedly about to be put up for sale.