UK grocer Morrison yesterday beat forecasts for first-half sales, signalling a strong start to a three-year plan aimed at recovering from its purchase of rival Safeway in 2004 and boosting its shares.

Britain's fourth biggest supermarket, which announced the recovery plan in March after posting its first annual loss, said like-for-like sales rose 4.6 per cent in the 25 weeks to July 23.

Six analysts polled by Reuters had forecast rises of between 3.9 and 4.2 per cent. The 107-year-old firm, founded by father of chairman Ken Morrison, also said sales on the same basis had accelerated to 6.1 per cent in the last nine weeks of the period and that it was ahead of target on its plan to improve gross margin - a measure of profitability - by 0.9 percentage points over the three years.

"We believe Morrison's impressive early progress changes the shape of its recovery and provides significant reassurance with near-term earnings consensus likely to move up aggressively," analysts at Morgan Stanley wrote.

Morrison shares, which had underperformed the UK food and drug retailing sector by about five per cent since the start of the year, jumped as much as seven per cent to a 16-month high of 221p following the announcement.

Analysts said warm weather, the World Cup and signs of easing in a long-running price war had helped all supermarkets in recent weeks, and were divided on the strength of Morrison's performance.

Deutsche Bank said it was likely to raise its full-year profit forecast to around £250 million from £210 million, and Citigroup said the consensus forecast was likely to rise to £240 million to £250 million from £215 million.

They were impressed by the improvement in Morrison's gross margin and the continued strong performance of stores converted from the Safeway format.

Morrison said like-for-like sales had improved at both its old Morrison stores and the converted Morrison stores.

Panmure Gordon, however, thought Morrison was lagging the supermarket sector, and Numis Securities said much of the good news was already factored into Morrison shares.

Tesco reported in June that its UK like-for-like sales excluding fuel rose 4.5 per cent rise in for the 13 weeks to May 27, but this was during the early stages of the World Cup and a heatwave.

A week later J. Sainsbury reported a 5.7 per cent rise in sales on the same basis for the 12 weeks to June 17.

Morrison, in a trading update ahead of first-half results on September 21, said like-for-like sales including fuel were up 6.6 per cent in the 25 weeks to July 23, including a 7.5 per cent rise in the last nine weeks of the period.

Total sales were up 0.1 per cent over the 25 weeks, and were down 2.2 per cent excluding fuel, reflecting the sale of a number of stores last year in the wake of the Safe-way deal.