Morrisons sales continue moving up in first quarter

Morrisons increased like-for-like sales 0.7% in the first quarter, or by 1.2% including fuel, at the top end of market expectations

Online gains led to the second consecutive quarter of positive like-for-like sales growth for the FTSE 100 supermarket group, which had been flagging in recent years.

Total sales in the 13 weeks to 1 May excluding fuel were down 1.8%.

"We are encouraged by progress across our six priorities,” said chief executive David Potts.

“There is still much to do and our colleagues are working very hard to improve the shopping trip and save customers every penny we can.”

The firm said it is continuing to simplify and “speed up” the business, with improvements being made to the shopping trip proving popular with customers.

Like-for-like transactions were up 3.1% in the quarter and like-for-like volume growth was described as “strong”. Deflation was 2.6%, as the company invested into price competitiveness.

“Customers are responding and satisfaction levels remain ahead of last year,” Potts added.

The transaction growth was also driven by a significant increase in sales of its ‘Food to Go’ range - up more than 17% year-on-year - following a successful launch of a number of new products.

Items per basket were down by 2.8%, however, with Morrisons blaming its new self-scan and express checkouts.

Looking ahead, Morrisons said it would continue to invest in improving the shopping trip for its customers.

It expects continued price deflation and a sustained improvement in customer satisfaction, while growing like-for-like volume remains a key priority.

Analysts were understandably impressed.

Credit Suisse said the key battleground was fresh food: "Given that Morrisons produces ~50% of the fresh food it sells and fresh food categories generally have the highest margins, it would be no surprise that volume improvements have been led by fresh.

"With Tesco's launch of their farm-branded lines at lower price points three weeks ago, we expect this category to be even more competitive going forward."

Analysts added that they expect Morrisons to complete its negotiations with Ocado over the near term, having agreed headline terms to share some of the capacity of Ocado's customer fulfilment centre currently under construction in Erith, south east London.

This was part of Morrisons' food supply agreement with online giant Amazon.com that will make hundreds of the grocer's products available to Amazon Prime Now and Amazon Pantry customers in coming months.