Supermarkets in rally as Morrison finds its ‘mojo’

Morrisons sparked a rush on supermarket shares today after revealing its best Christmas performance for seven years.

Sales at stores open for more than a year grew a better-than-expected 2.9% in the nine weeks to January 3 while total sales were up 2%, the first positive result in more than three years.

The supermarket upgraded its forecast for full-year underlying pre-tax profit to between £330 million and £340 million, ahead of a consensus estimate for £326 million.

The numbers spurred hopes that Britain’s major grocers could finally turn the tide on discount rivals like Aldi and Lidl, which have shaken up the sector in recent years.

Morrisons shares approached a three-year high, surging 10p to 247.4p, while Tesco rallied 8.1p to 209p and Sainsbury’s rose 3.8p to 258.6p. Both will report Christmas sales this week.

Morrisons boss David Potts (pictured), who arrived in 2015 to turn around the grocer after years of falling sales, said the company had “found our mojo”. He added: “We remain in fix mode but we are delighted to have found our form in the trading side of the business.

“Sales momentum in food retailing is very important. It tends to breed confidence both in customers who are shopping in busier stores… and inside the company that people are doing the right things.”

Growth had come across the board, but Potts highlighted successful promotions on festive vegetables and its Best premium range, including a pack of “shimmering” macarons and a Christmas tree-shaped gateau, which fitted with customers’ desire to trade up.

“We were more relevant to more people at Christmas. Customers were feeling fairly chipper and were prepared to splash out at Morrisons,” Potts said.

He expressed confidence for the year ahead despite looming challenges, including the weaker pound driving up costs. Research firm Kantar Worldpanel today said inflation returned to the grocery market in the last three months of 2016 after more than two years of deflation.