Morrisons has reported an 8% rise in underlying profit in its interim results to £442m but warned the trading environment would continue to be challenging.

For the half year to July 31, pre-tax profit was up from £412m to £449m. Turnover was up 7.4% to £8.7bn and like-for-like sales excluding VAT and petrol were up 2.2%.

Chief executive Dalton Philips said: “In a tough economy shoppers are looking for unbeatable value on fresh food, great deals on national brands and the best prices at the petrol pump.  Our “Price Crunch” campaign has delivered these for our customers throughout the period.

“In addition to growing sales and delivering good profit growth, we also made great strides in developing the business for the future.  We have opened our first convenience store, invested further in our unique production capabilities, increased efficiency across the group, gained valuable insights from our trial stores and taken our first steps towards becoming a multichannel retailer. I am confident we will make further good progress in the second half.”

In the period, Morrisons said it reported record customer numbers at 11.5 million per week, and opened 16 ex-Netto stores. It also acquired Flower World, opened its first convenience store M Local, and is progressing with the integration of Kiddicare. It has also hired a director from Apple to lead its launch into online food.

The grocer said it expected the trading environment to remain challenging but with its growing customer base and ongoing focus on tight cost control, it is confident of delivering its expectations for the year.

Morrisons said food price inflation increased in the period, and with industry like for likes at modest growth, the sector experienced volume declines. It said its growth was 0.8% ahead of the market.

The grocer has developed a test store for fresh foods at Kirkstall and said it will seek to roll out aspects of it in 2012. It will also roll out aspects of its test store in Shrewsbury which has rebalanced space next year.

In York Morrisons has been improving store productivity, with a target of £100m of productivity gains across the business. Initiatives included opening service counters later in the day. Several of these initiaitves have been rolled out and it is on track to deliver its financial targets for the project.

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