Yorkshire supermarket Morrisons beats forecasts with 3.6% sales hike

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The UK's fourth biggest grocery chain notched up its 10th quarter in a row of rising group like-for-like sales and defied expectations of a slowdown in growth after the sector was battered by the Beast from the East cold snap earlier this year.

But it remained tight-lipped in the first quarter update on the £12 billion merger of rivals Sainsbury's and Asda, which will spark one of the biggest shake-ups in the supermarket sector since Morrisons itself took over Safeway 14 years ago.

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The tie-up will create a supermarket titan bigger than Tesco with revenues of £51 billion and a network of 2,800 Sainsbury's, Asda and Argos stores.

In its update, Morrisons said supermarket and online sales growth eased slightly to 1.8% in the 13 weeks to May 6, down from 2% in the previous three months, but this was still better than forecast.

The group said it was "now open for business as a wholesaler", with the division largely behind the impressive performance, with sales up 1.8% - a surge from the 0.8% seen in the previous three months.

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Chief executive David Potts said: "We are pleased to have made a strong start to the year, again becoming more competitive for customers while delivering growth on growth.

"We expect to continue to improve in the year ahead."

Shares lifted 2% after the update.

Analysts have praised the turnaround plan being led by Mr Potts, including his recent launch of the cut-price Wonky vegetable range and wholesale push through deals such as that with McColl's.

Morrisons held on to its market share at 10.5% in the most recent industry data from Kantar Worldpanel, while Tesco remained at 27.6%, and Sainsbury's and Asda both lost ground at 15.9% and 15.5% respectively.