Morrisons said it enjoyed strong Christmas and New Year trading as like-for-like retail sales rose 2.1% in the ten weeks to 7 January.
The Bradford-based retailer – the first major supermarket to reveal how it performed over the recent festive period – said it had kept a lid on prices for shoppers despite higher commodity costs.
It added that sales of its “Best” premium products were up by a quarter, new home and leisure ranges were proving popular and online sales grew 10%. Shares opened 4% higher before the gains were pared back to about 2% later.
Morrisons said overall group like-for-like sales were up by a better-than-expected 2.8%, boosted by a wholesale deal with convenience store chain McColl’s.
The company said performance was “especially strong over the Christmas and New Year period” with store sales up 2.8% and group sales up 3.7% in the six weeks to 7 January.
Image: David Potts took over at Morrisons in 2015
Morrisons said it had become more competitive despite the increase in its buying costs – which have risen for many UK businesses after the collapse in the pound following the Brexit vote made imports more expensive.
“Despite input cost pressures on many commodities, the price of a basket of key Christmas items was the same as last year,” the company said.
Chief executive David Potts – who has been credited with turning around the performance of the business – said: “More and more customers found more things they wanted to buy at competitive prices at Morrisons this Christmas.”
Laith Khalaf, senior analyst at Hargreaves Lansdown, said by keeping down prices it was likely to have taken a hit on profit margins or squeezed its suppliers.
Elsewhere, Majestic Wine’s chief executive Rowan Gormley said it had performed “brilliantly” over the key Christmas period, with like-for-like retail sales up 1.3% while it maintained its profit margin at the same level as last year.
He said it showed the business’s “winning formula” worked “even when times are tough”.
Image: Majestic Wine’s boss said it had performed brilliantly
Those comments reflect a difficult environment for retailers as consumers are squeezed by higher inflation and weak wage growth – meaning that in real terms, their pay is falling.
Tesco and Sainsbury’s are due to report Christmas trading figures later in the week.
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Investors were also responding to industry data from Kantar Worldpanel showing that shoppers spent an additional £1bn in grocery stores over the 12 weeks to 31 December – trading up to more expensive items despite tightening budgets.
Tesco was the fastest growing of the major supermarkets, according to Kantar.