Wm Morrison forecast a frugal Christmas as it delivered underlying sales growth that outpaced its rivals.
Dalton Philips, chief executive, said: “It is going to be a very tough Christmas. Consumer sentiment is the lowest in a generation. People are being very frugal.”
However, he said this was expected to benefit Morrison, which unveiled a 2.4 per cent increase in sales from stores open at least a year, excluding fuel and value added tax, in the third quarter.
“That is going to play to our strengths. We have a very strong Christmas programme, and we intend to win it,” he said.
Mr Philips said consumers continued to become “more professional in their approach to shopping”, leaving their credit cards at home, checking prices in store, telling their friends about special offers and cooking from scratch.
“These shifts have shown no sign of abating,” he said.
One third of Morrison’s 11.5m customers a week have little or no spare money left at the end of the month. So the supermarket is cutting prices on single items at the end of the month, and reverting to promotions on big packs of beer or soap powder after payday.
Morrison was helped in the three months to October 30 by cutting prices, and “lifting the mood with fun promotions” such as offering customers the chance to win money in store.
It had also enjoyed a 60 per cent increase in sales of prepared foods after it relaunched its own brand ranges of ready meals, pies and pizzas under the M Kitchen label.
It had sold 320,000 of the five dishes launched in partnership with top chefs, with 270 of Nigel Haworth’s Lancashire hotpots sold every hour.
Mr Philips said this was playing into consumer trends as more Britons ate at home.
“People can’t afford to eat in restaurants. We have got restaurant quality at Morrison pricing. It's the right category to be getting into particularly as we get into Christmas,” he said.
Mr Philips also said he had seen no impact from Tesco’s decision to spend £500m cutting prices.
“Our price perception has never been stronger, and that is why we have been growing [market] share every month this year,” he said.
As well as enjoying like-for-like sales growth, the addition of 10 new supermarkets – including one convenience outlet – boosted total sales excluding fuel and VAT by 4.6 per cent.
Morrison refused to comment on the auction of Iceland Foods, for which it has put in a first round bid.
It announced a $250m extension of borrowing facilities through a US private placement.
But Richard Pennycook, finance director, said this was the first step in a plan to raise long-term financing, to fund investment in new initiatives and a £1bn share buy-back.
Shares in Morrison rose 11.3p to 317.8p.
Additional reporting by Rose Jacobs
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