Morrisons struggles as profits and sales slide

Morrisons slump has continued with to another six months of sliding profits and sales as it said its customers have yet to benefit from the gradually improving economy.

The UK's fourth-biggest grocer delivered a worse-than-expected 1.6% decline in underlying sales in the six months to the start of August, while pre-tax profits dived 22% to £344 million.

It said customers' incomes are shrinking under relentless pressure from stubbornly high inflation, as the recovery proves "slow and fragile".

Customers are increasingly shopping about for bargains, it added, with more than 40% visiting multiple supermarkets on one shopping trip, and they are buying less food as they stick rigidly to budgets.

But the chain reported more progress with expanding its network of convenience stores. It is trading from 33 and expects to have 100 by the end of its year.

Chief executive Dalton Philips said like-for-like sales are steadily improving after falling 1.8% in the three months to May 5, adding he expects another sales improvement in the second half as its turnaround bears fruit.

Morrisons said it is on track to start selling food online - through a tie-up with internet grocer Ocado - by the end of January.

It said 169 stores have been overhauled with its Fresh Format, which emphasises the quality of its food and shows off its butchers, bakers and fishmonger.

The chain said: "Whilst there are early signs that the UK economy has started to turn a corner, the grocery market continues to be a very challenging environment in which to operate.

"Consumers are continuing to react to these pressures by becoming more discerning, and seeking to get better value for money by both shopping across multiple channels and using innovative approaches to the way they shop."