British supermarket group Morrisons retained its financial guidance for the year as it reported a 1% increase in quarterly underlying sales, in a sign that its plan to become more price competitive was gaining traction.
Morrisons, owned since 2021 by US private equity firm Clayton, Dubilier & Rice, is the fifth biggest player in Britain's ultra-competitive grocery market, all of which face headwinds from the country's stubbornly high inflation.
Food inflation was running at 16.5% in June, based on industry data, prompting shoppers hit by a cost of living crisis to hunt out the best deals.
Morrisons said that total sales, excluding fuel, rose 3.1% to £3.7 billion (€4.3 billion) over the 13 weeks to April 30. The 1% rise in underlying sales masks a drop in volumes when accounting for inflation.
'Tactical Price Cuts'
Chief executive David Potts said the group was making progress with its plan to return to sales growth, after declines last year meant it fell behind competitors and was overtaken by Aldi, which became the country's fourth largest supermarket.
"Through the quarter we continued with our programme of large scale price cutting campaigns, complemented by quick, tactical price cuts in areas where we can see the early signs of inflation easing," he said.
The Bank of England, the UK government and consumers are watching for signs that inflation is moderating, hoping for an end to the squeeze caused by the price pressures and rising interest rates which were raised to 5% from 4.5% on Thursday.
For its current financial year, Morrisons stuck to a forecast for core earnings, or EBITDA, to be higher than last year, and for debt to be lower.
Morrisons is aiming to make £700 million of cost savings over the next three years, enabling it to further invest in its loyalty programme, prices and grow its convenience store business.