WM MORRISON has turned in its best quarterly like-for-like sales growth in nearly a decade, boosted by quicker than expected results from its wholesale deal to supply the McColl’s chain of newspapers and convenience stores.

However, shares dipped by more than two per cent amid a warning from the grocer that conditions in the UK food retail sector continue to be “highly competitive”, with Brexit continuing to bring “consumer, economic and political uncertainty”.

The share price closed down 5.6p at 260.25p, down from four-year high of 270p in August but well ahead of its year-low of 204.3p in March.

Intense price competition in the grocery sector, played out against a backdrop of faltering consumer confidence, has seen Sainsbury’s and Asda pursue a £12 billion merger in a move which would create the UK’s biggest grocery group. Morrisons has been tipped to pick up some of the stores Sainsbury’s and Asda may have to sell to satisfy the competition watchdog. Tesco meanwhile has unveiled plans to launch a discount chain to take on Lidl and Aldi.

Yorkshire-based Morrisons said yesterday that like-for-like sales, excluding fuel, grew across the group by 6.3 per cent in the second quarter – a nine-year high.

It was the eleventh consecutive quarter of like-for-like growth recorded by the group under chief executive David Potts, who was hired in 2015 to mount a turnaround at the grocer which had lost share to Lidl and Aldi.

Morrisons, which has 62 stores and around 10,400 staff in Scotland, said like-for-like sales were up 4.9% on the first half of last year, with the second quarter helped by the warm weather and the football World Cup in Russia, in addition to the McColl’s roll-out.

The grocer’s wholesale offer, which sees the grocer supply goods under the revived Safeway brand, was extended to 1,300 McColl’s stores during the period, putting the roll-out ahead of schedule.

It is now on course to achieve its target of total annualised sales of £700m before its initial end of 2018 guidance, and £1 billion in annual sales ultimately.

Morrisons lifted underlying profits by 9% in the first half to £193m, with the company generating sufficient free cash to issue a special interim dividend of 2p. It increased its total interim dividend to 3.85p – up 132%.

“Morrison’s continues to make progress with its turnaround,” said Nicholas Hyett, equity analyst at Hargreaves Lansdown. “Retail sales are growing steadily, while its wholesale division is turbo-charging the group’s top-line.

“Flat margins could be a touch disappointing, but given the presumably lower margin in the wholesale business, it still suggests an improvement in the performance on the retail side.”

Morrisons said it kept in-store inflation in check by investing in competitive deals for shoppers, and declared that its volume growth was strong in supermarkets, online and in wholesale.

Since period-end the grocer has introduced its long-awaited online offer in Scotland, under which it says it will be able to serve one million households. The facility is served by four delivery hubs at supermarkets in Livingston, Hamilton, Auchinlea and Granton, with booking slots having initially been made available in Edinburgh and most of Glasgow prior. The service is gradually being expanded throughout the Central Belt this month.

Mr Hyett suggested there is room for improvement in this area. “Longer term, the group needs to strengthen its online offering, and convenience has also been a weak spot,” he said.

“However, management are taking steps to improve both areas and initial signs are good."

The grocer highlighted “multiple growth opportunities” flowing from its turnaround strategy, which has been running for more than three years and is credited with making Morrisons “broader and stronger”.

However, it said there is still more to come from the strategy.

Mr Potts said: “Strong growth, including our best quarterly like-for-like sales for nearly a decade, together with another special dividend for our shareholders, shows how new Morrisons can keep improving for all stakeholders.”Sales growth at Morrisons climbs to nine-year high