Morrisons posted a 21.8% drop in pre-tax profit to £344 million for the six months to August 4. Underlying profit, excluding various development costs, fell a worse-than-expected 10% to £401m, as like-for-like sales declined 1.6%.
Chief executive Dalton Philips said: "Morrisons remains a strong, profitable business."
He added: "We are heading in the right direction."
The Bradford-based chain became the latest company to call a halt to the "space race" saying future expansion would be focused on convenience stores and online shopping.
Mr Philips said: "The opportunity for us and the sector is no longer in building more and more supermarkets. The space race is well and truly over."
Market leader Tesco and number three J Sainsbury have already reduced store openings.
Morrisons' new approach would, it said, cut expansion costs by 30% against building new supermarkets.
Capital expenditure will fall from £1.2 billion this year to £850m next year, then £650m.
The company is also reviewing its £9bn property estate, 90% off which has valuable freehold status. Analysts predict that Morrisons could sell and in some cases lease back part of its portfolio, such as warehouses and shopping centres.
Oriel analyst Jonathan Pritchard said: "The consequence of this is that cashflow will be very strong from 2015 onwards, and management has expressed an intention to return surplus capital to shareholders."
Morrisons has opened 33 convenience stores, aiming to take its estate to 100 this year and 200 by the end of 2014. An M Local opening in Kilmarnock on Thursday will be its first north of the Border and it has ambitions to bring others to the Lothians and North East Scotland.
Mr Philips indicated Morrisons could buy up portfolios of small stores.
"We are going to be able to pick up pieces as retailers come out of the high street. We are going to see more and more packages of shops coming up which is a great opportunity for us," he said.
Morrisons is keen to extend beyond its heartlands in northern England and Scotland, where it is the market number three against fourth UK-wide, into southern England.
It has not yet revealed where it will offer online shopping after its launch in January. Morrisons has signed a 25-year contract with online specialist Ocado, which currently delivers Waitrose items.
Mr Philips said: "There is a big opportunity to go for. We will shore up part of our heartland and we will attack where there is white space for us."
The company said that consumers are still struggling.
Mr Philips said: "The recent uptick in spending has been more a result of dipping into savings or increased borrowings. Economic growth has yet to filter through to consumers' pockets."
He added: "Scotland is holding up. Clearly things are still very tough outside of London and the south east. But there is a strong can-do attitude in Scotland that I have noticed on my visits."
Morrisons' shares closed up 5.3p or 1.8% at 302.5p.
Meanwhile at Waitrose, which will have six stores in Scotland when it opens in Helensburgh later this year, saw like-for-like sales rise 6.9%. Operating profit at the upmarket chain rose 12.8% to £160.2m.