Morrisons, owned since 2021 by U.S. private equity firm Clayton, Dubilier & Rice, was overtaken as Britain's fourth-largest grocer by market share by German-owned discounter Aldi last September, according to researcher Kantar.
Monthly industry data has consistently shown the group underperforming rivals including market leader Tesco and No. 2 Sainsbury's.
But chief executive David Potts said the company's focus since October on becoming more competitive on key items had started to bear fruit, and further work on prices would help it add customers this year.
"Since October we have executed a rolling programme of meaningful price cuts, price freezes and fuel promotions for our customers and our competitive position has considerably sharpened," he said on Thursday.
That turnaround gave Potts confidence that earnings would grow this year, despite continued cost and inflationary headwinds.
Sales in the three weeks before Christmas were up 2.5% year on year, said Morrisons, which has a UK grocery market share of 9.1%.
Retailers in Britain are competing to draw in increasingly price-conscious shoppers.
With UK household finances squeezed by inflation that stood at 10.5% in December, consumer confidence is close to historic lows. British consumer spending in December saw its steepest year-on-year drop in at least 25 years, official data published last week showed.
In the financial year to end-October, Morrisons reported a 15% drop in core earnings (EBITDA) to 828 million pounds ($1.03 billion) while underlying sales fell 4.2%.
Analysts had suggested that Morrisons' debt burden following CD&R's £7 billion purchase has impacted its ability to maintain price competitiveness.
The supermarket's finance chief told reporters net debt would fall in the current year.