Morrisons is confident that its full-year results will come in ahead of expectations as strong trading continued into its second quarter.

Broker Merrill Lynch said Morrisons’ profit performance “is in a different orbit” and the broker expects full-year pre-tax profit to be £70m higher than the consensus of £665m to £670m. Merrill Lynch increased its forecast from £696m to £750m, assuming £30m of one-off costs relating to the acquisition of 38 stores from Co-operative Group.

The grocer reported that it continues to attract new shoppers with its fresh offer and keen price positioning and promotions. It said the resultant volume growth and better than projected improvements from its optimisation plan mean its gross margin is expected to exceed expectations by about 40 basis points.

Morrisons added that operational leverage and better in-store efficiencies should bring £20m of additional cost savings.

Merrill Lynch analyst John Kershaw said: “Morrisons is demonstrating that it has kept the best of its old retail DNA and is benefiting from a strong infusion of the new.” The broker reiterated its buy recommendation.

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