Morrisons has made a flying start to 2011, attracting record numbers of customers to its stores with Easter and Royal Wedding promotions – but the retailer is braced for tougher trading ahead in uncertain economic times.

The Bradford-based supermarket group reported a boost to sales and beat City forecasts with its performance in the 13 weeks to May 1.

The UK’s fourth biggest supermarket chain said a 2.5 per cent rise in like-for-like sales for the period represented an ‘encouraging start’ to its financial year, with sales growth ahead of the rest of the market.

But Morrisons said the current squeeze on disposable incomes meant it remained cautious about prospects going forward.

The company has responded to austerity conditions with a series of promotions, including its Fuel Britannia petrol offer, which has offered customers 6p off every litre of fuel when they spend £40 or more in store.

It has also followed a series of price promotions at the start of the year with ‘Let’s Celebrate’ campaigns for Easter and the recent Royal Wedding of Prince William and Kate Middleton.

The trading boost comes as chief executive Dalton Philips attempts to boost the chain’s position in internet and convenience store shopping.

He has pledged to launch an online shopping operation within two years after earmarking £3 billion in investment to catch up with web-savvy rivals.

The group is also seen as a potential bidder for frozen food chain Iceland, which is reportedly about to be put up for sale.

Morrisons said the anticipated economic backdrop remains challenging, stating: “The high price of oil, together with increases in other commodity prices, has further compounded the existing pressures on consumers’ disposable incomes.

“In this environment our unique fresh and quality offer, backed by value pricing and an outstanding and innovative promotional programme has again proved to be exactly what consumers want.”

Morrisons total sales, excluding fuel, were up by 4.2 per cent (7.3 per cent including fuel). Like for like sales grew by 2.5 per cent (5.8 per cent including fuel).

The group said: “We remain focused on managing our costs tightly and generating profitable growth through the delivery of the operating and strategic initiatives that we outlined in March. These are all on track.

“The board is encouraged by the group’s progress in the first quarter but with consumers’ disposable incomes falling and an uncertain economic environment, we remain cautious. Our overall expectations for the full year remain unchanged.”

  • Read the full story in Friday's T&A