British supermarket group Morrisons’ first-half profit plunged by more than a third to its lowest level in nine years, showing the scale of the task facing its new boss to revive the company’s fortunes in a brutally competitive market.

The UK’s fourth-biggest grocer warned its turnaround plan would require substantial and sustained investment. Along with larger rivals, it is locked in a price war to stem the loss of shoppers to German discounters Aldi and Lidl and is also grappling with commodity-driven price deflation.

"It will be a long journey," said David Potts, the former Tesco executive who succeeded the sacked Dalton Philips as chief executive in March.

Chairman Andy Higginson has previously talked about a five-year project.

Morrisons, based in Bradford, trails market leader Tesco, Asda and Sainsbury's in annual sales. It has been particularly hard hit by the rise of the discounters, who are strong in its northern heartlands.

Having invested £181 million (€248 million) in the first half of its financial year, mainly on price cuts, the company’s full-year investment would top £300 million (€410 million), said Mr Potts.

Bernstein analyst Bruno Monteyne said it was still unclear how Morrisons could compete on price against the discounters and match the service of Sainsbury’s and Tesco.

“Until we see the first signs of a retail proposition that has consumer appeal and that has been well costed, we do not anticipate margin improvements at the true underlying level.”

Shares in Morrisons initially fell up to 6 per cent but recovered some ground to close down 2.8 per cent.

Mr Potts declined to comment on recent takeover speculation prompted by Morrisons’ relatively low valuation.

The company said on Wednesday it was pulling out of the convenience store sector, having decided its stores were in the wrong place and not good enough to compete. – (Reuters)