Morrisons pre-tax profit plunged 22.1% to £344m in its first half as the grocer invested in reducing pricing, increased marketing and entering new channels.
Underlying profit dropped 10% to £401m in the half to August 4 and like-for-likes dipped 1.6%.
Total sales remained flat at £8.9bn while store sales edged up 0.8%.
Morrisons non-executive chairman Sir Ian Gibson said: “Consumer confidence and market conditions have remained challenging in the first half. We have continued to invest in and develop our customer offer and this has been reflected by an improved sales performance compared to the second half of last year.”
The grocer said that while the early signs of a recovery in the UK economy are encouraging, it had yet to see this impact on consumers’ pockets.
Chief executive Dalton Philips said: “Our strategy for growth in convenience and online is now set. Today we are outlining our financial strategy, which will support our key financial objectives of growing underlying earnings, generating cash and delivering superior total shareholder returns.
“This is against an economic backdrop which remains difficult for the consumer, but where our relentless focus on providing great value and quality to our customers, and improving the way we communicate Morrisons unique points of difference, have been reflected in a steady improvement in our like-for-like sales performance.”
Philips said 10% of its profit reduction was due to investment in new channels including write-off costs relating to earlier online projects and investment in new Kiddicare and M Local stores.
He added: “The other 10% - is because we chose to invest in our core proposition to customers, including stronger base pricing.”
Morrisons said it expects sales to improve in the second half and the board believes that full year performance will still be in line with previous expectations.
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Morrisons first half pre-tax profits plunge as like-for-likes dip