Wm Morrison Supermarkets, Britain's fourth largest grocer, posted a 51 per cent slump in first-half profit, hurt by its move to cut prices to counter a loss of market share to discounters and by a weak overall food market.

The Bradford, northern England, based group, which trails market leader Tesco, Wal-Mart's Asda and J Sainsbury, issued a massive profit warning in March.

It set out a plan to restore its low-price image and boost sales volumes by spending £1 billion cutting prices over the next three years. The move sparked fears of an industry price war.

It said on Thursday that plan was on track.

“While like-for-like sales performance is yet to improve, there are some encouraging initial trends,” it said.

“Our initiatives are on track and we anticipate that these will start to benefit our sales performance towards the end of the second half.”

Morrisons made an underlying pretax profit of £181 million in the six months to August 3rd.

The outcome, its lowest for eight years, compares with analysts’ average forecast of £174 million, according to a company poll, and £401 million made in the same period last year.

Morrisons has been losing market share to discounters Aldi and Lidl, and has also suffered because it lagged rivals in entering fast-growing online and convenience store markets.

Turnover fell 4.9 per cent to £8.5 billion, while sales at stores open over a year, excluding fuel and VAT sales tax, fell 7.4 per cent, having fallen 7.1 per cent in the first quarter.

Despite the profit fall Morrisons is paying an interim dividend of 4.03 pence, up 5 per cent and confirmed a commitment to pay a full-year dividend of not less than 13.65 pence.

Morrisons also confirmed full-year 2014-15 underlying pre-tax profit guidance at £325-375 million.

Shares in Morrisons, down 40 per cent over the last year, closed Wednesday at 176.6 pence, valuing the business at £4.1 billion.

Reuters