Morrisons warns of pressure on shoppers

Supermarket chain Morrisons expects shoppers to remain under pressure into the second half of next year, but has played down fears of a surge in food prices.

Its outlook came yesterday as it met forecasts with a 1.3 per cent rise in third-quarter underlying sales.

Britain's retailers are worried that tax hikes and public spending cuts aimed at reducing government borrowing could hit spending in the coming months, and that they might struggle to pass on rising input prices to cash-strapped consumers.

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Morrisons - the UK's fourth-biggest grocer - said it did not see big inflationary pressures and noted that consumers were offsetting the impact of rising prices by buying more goods on promotion. Finance director Richard Pennycook said: "We think through until really the second half of 2011, people will be very focused on value."

The 1.3 per cent like-for-like sales rise for the 13 weeks to 31 October reflected a slight increase in retail price inflation. It compares with an increase of 0.9 per cent in the six months to 1 August - a period when Morrisons racked up profits of 412 million.

Seymour Pierce analyst Kate Calvert said: "These numbers highlight that while inflation is coming through for the industry, volume growth remains lacklustre and we expect this situation to continue into 2011 given the consumer headwinds of rising taxation and public sector job insecurity.

"Morrisons has gone through a period of super-normal catch-up growth post the integration of Safeway and we believe it is returning to more normalised industry average growth rate."

Total sales in the third quarter, which factor in store openings and additional selling space, were up by 2.8 per cent and ahead by 4.7 per cent when including petrol forecourt sales.

Morrisons runs about 430 stores.

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