Morrison tops grocer growth

By Mark Potter

LONDON (Reuters) - Wm Morrison (MRW.L) topped the supermarket growth league with a 7 percent rise in first-quarter underlying sales, but said trading was tough and it was cutting 2,000 prices to lure cash-strapped shoppers.

Britain's fourth-biggest supermarket group said on Thursday it was taking customers from its bigger competitors and benefiting from revamped stores as it continues to recover from the botched integration of the Safeway chain it bought in 2004.

However, some analysts said the good news was already priced into Morrison shares, which trade at a higher ratio to forecast earnings than rivals Tesco (TSCO.L) and Sainsbury (SBRY.L).

The stock fell 3 percent in early trading.

"Good numbers, but in the price," Panmure analyst Philip Dorgan said in a research note. "Progress will become more difficult as the consumer recession spreads into less discretionary items of household spend."

Morrison Chief Executive Marc Bolland also told reporters that the firm was not interested in bidding for privately owned rival Somerfield, but would look at buying individual stores if they became available.

The Co-Operative Group, Britain's biggest mutual retailer, has said it is in talks to buy Somerfield, and the Daily Telegraph newspaper said on Wednesday it was looking to sell up to 200 stores following a deal.

SLOWING, BUT STILL IN FRONT