Belgian discount supermarket Colruyt has reported that its first-half profits came in below expectations as energy and staff costs hit margins.

The grocer benefited from the popularity of discount supermarkets but warned that the market is challenging. EBIT rose 7.7 per cent to 212.5 million (£181.5 million) in the six months to September 30, about 4 per cent shy of consensus.

In a statement, Colruyt said labour costs increased faster than revenue, citing Belgium’s system of automatic wage indexation, extra costs for temporary workers and the training of new staff to support expansion. At the period-end, Colruyt employed 1,814 more staff than the previous year giving a total of 19,496.

In the retail division, sales at the Colruyt stores rose 12.4 per cent to 2.05 billion (£1.7 billion). This growth was stimulated by the introduction of its Extra Discount card in May and its low-price strategy, which has seen it gain market share. In Belgium, Colruyt competes with the other hard discounters, Lidl and Aldi.

Dresdner Kleinwort research analyst James Grzinic said most of the 40 basis point hit to retail margin is due to a soaring wage bill, up 20 per cent, and is worse than expected. He said he anticipates a 2 to 3 per cent cut to its full-year forecast. Colruyt, however, said it maintains its 2008/09 net profit guidance of 304 million (£259.7 million).