Britain’s fourth largest supermarket said like-for-like sales, excluding VAT and fuel, fell 0.9 per cent in the first half of the year, dragging profits down by £9m to £440m.
Chief executive Dalton Phillips said high oil prices, high levels of unemployment and cuts in disposable income meant consumer confidence and basket spend remained low.
Like its peers, the group has decided to trim its target for new store space by 500,000 square feet to 1.4m square feet over the next two years, to make £100m of savings.
Phillips said the grocer will turn its attention to the convenience market, with plans to extend its three trial M Local stores and open another 15 by the end of the year before accelerating the roll-out in 2013.
“Growing our presence in London, where we are under-represented, is a significant opportunity for Morrisons and convenience outlets are key to our development in the capital”, he said.
The grocer said it will make its first move into the online market, with the launch of an online wine specialist site Morrisons Cellar later this year.
Phillips said Morrisons’ 45 new Fresh Format stores, which have been refitted with a wider fresh food offering, have seen average sales up four to six per cent compared with normal stores and plans to convert 100 by the end of the year.