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 range were up by a quarter while new home and leisure ranges were proving popular, and online sales grew 10%. Shares opened 4% higher.
The figures come after monthly data from the British Retail Consortium (BRC) showed a stark disparity between the performance of supermarkets and non-food retailers, as squeezed shoppers prioritised essentials such as food leaving less left over for Christmas gifts.
Tesco and Sainsbury’s are due to report later in the week. Their share prices were both ahead after the Morrisons update.
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 1 January – trading up to more expensive items despite tightening budgets.
Morrisons 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”.
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.
Figures from the BRC also out on Tuesday showed UK retailers saw a 0.6% like-for-like sales rise in December but the report highlighted how the “severe pressure” on spending was weighing heavily on some firms much more than others.
It said that for the three months to December, food sales were up 2.6% but non-food sales saw their worst decline since March 2009 – at the height of the financial crisis – with a fall of 1.9%.
BRC chief executive Helen Dickinson said: “The divergence between growth in sales of food and non-food has never been so stark.
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“With inflation outpacing income growth, shoppers continued to see more of their spending power absorbed by essential items, including food, leaving less left over for buying Christmas gifts.”