Morrisons enjoys surprise Christmas sales boost

Supermarket Morrisons said customers are coming back to its stores as it posted a surprise rise in festive sales after its best Christmas for four years.

The Bradford-based grocer reported a 0.2% rise in sales at established stores, excluding fuel, in the nine weeks to January 3 in a marked turnaround after recent hefty sales declines.

Figures for the six weeks to January 3 showed an even better performance, with like-for-like sales up 0.5%.

But Morrisons said it would close another seven stores despite the improved trading, putting around 680 jobs at risk.

The closures follow its announcement last September that it was shutting 11 stores, impacting around 900 jobs.

Morrisons shares surged by 9% after the better-than-expected trading update, while the cheery start to festive trading from the Big Four players sparked gains for its listed rivals Tesco and Sainsbury's, who update on Christmas trading over the next two days.

Analysts were expecting sales to fall by 2% at Morrisons, coming against a tough backdrop in the supermarket sector as the major chains have been waging a fierce price war in the face of competition from discounters Aldi and Lidl.

Morrisons said it was "beginning to attract customers back" as the performance marked its first rise in sales over Christmas for four years.

It also comes after 15 quarters in a row of falling sales at the grocer.

Morrisons chief executive David Potts, who took the helm in March from Dalton Philips, said: "We are pleased with our improved trading performance over the Christmas period.

"While there is of course much more to do, we are making important progress in improving all aspects of the shopping trip."

The encouraging Christmas performance follows a 2.6% drop in sales in the previous three months and comes after disappointing festive figures last year, when sales fell 3.1%.

Morrisons notched up the sales increase despite further falls in prices - down 3.2% excluding fuel over the period - as this was offset by a significant rise in the number of transactions, ahead by 1.3% on a like-for-like basis.

This also helped counteract the ongoing hit from the group's decision to cut back on discount vouchers, which knocked around 1% off like-for-like sales growth.

Morrisons said its overall sales rise came mainly after an improvement from its core stores, although online sales contributed 0.9% to the nine-week growth.

It saw strong sales of beer and wine, while its Nutmeg clothing range also fared well, as did the M Signature premium food range.

Experts at Jefferies said the figures suggested Morrisons was "at a turn", giving hope that 2016 could be a year of recovery for the embattled chain.

Stephen Springham, head of retail research at Knight Frank, added: "This could mean that the UK grocery market as a whole fared better than feared over the festive period."

But Mr Potts stressed trading could remain volatile, saying the "turnaround will not be in a straight line".

Morrisons, which has nearly 500 stores, has lost market share heavily in recent years and Mr Potts has been leading an overhaul since taking the helm.

As well as the recent store closures, Morrisons also agreed the sale of 140 M local convenience stores last September for around £25 million to concentrate on its larger supermarkets.