Morrisons sales defy snow

Supermarket group Morrisons defied the bad weather to post a better-than-expected rise in festive sales yesterday, but City analysts still forecast Tesco and Sainsbury's will outstrip their rival later this week.

The UK's fourth-biggest food retailer posted like-for-like sales growth, excluding fuel and VAT, of 1 per cent in the six weeks to 2 January.

That compared with City forecasts of a rise of between 0.5 and 0.8 per cent.

Morrisons has been seen by the City as weakened because of the lack of online shopping, and its update came as some internet retailers showed strong growth.

Gross sales at online grocery group Ocado jumped 27 per cent in the four weeks to Boxing Day, while Shop Direct, the web and home shopping firm that owns Littlewoods and Woolworths.co.uk, posted festive sales up 5 per cent.

Dalton Philips, chief executive of Morrisons, said it had been a "good performance in a tough market" against the backdrop of a lengthy spell of bad weather and a difficult backdrop for shoppers.

The supermarket giant, which has 56 Scottish stores, said one of its best festive sellers north of the Border was Best Spey smoked salmon, with sales up just under 40 per cent on the same period last year.

Sales of Scotch lamb were also up, with the volumes of lamb processed at Morrisons' Turriff plant in Aberdeenshire 17 per cent ahead.

However, the group repeated its caution of last autumn about prospects in the coming year despite plans to create 5,700 jobs by opening additional stores, and 300 back-up jobs.

The firm said it recognised that "the economic background for the UK consumer will be challenging" through a mixture of the recent VAT rise to 20 per cent and public service spending cuts that are meant to cut the public debt by 80 billion.

Analysts expected Morrisons to be hampered by its greater exposure to northern England and Scotland, which was hit hardest by the bad weather, but had mixed views about its prospects.

Altium Securities said in a note: "Morrisons performed better than we had expected over Christmas, and there is no whingeing about the weather."

However, Kate Calvert at Seymour Pierce, said: "We suspect Morrisons' performance will turn out to be the weakest of the (food] majors, with Sainsbury's due to report on Wednesday and Tesco on Thursday."

Ocado's finance director Andrew Bracey said: "You're seeing an acceleration of customers going online for their groceries."However, Philips played down speculation Morrisons might bid for Ocado, saying it was focused on developing its own online business.

Keith Bowman, an analyst with Hargreaves Lansdown, commented: "I think Morrisons will go ahead with an online operation, even if it would probably be launched conservatively.

"It is not a near-term problem for the company, but if they did not develop an online offer it would leave them exposed to having an ageing customer base and not developing a younger base."

Shares in Morrisons nudged up 1p to 271p.