Underlying pre-tax profit of £359m, matching expectations boosted by a profits upgrade over the summer, was underpinned by a 7.8% rise in sales at stores opened for at least a year for the half year to August 2.

The Bradford-based group was helped by the early re-opening of 34 Somerfield stores from the Co-operative including Dunoon, Cowdenbeath, Lanark, Banchory north of the border.

Buying and refurbishing them cost £320m.

But a warning from the UK’s fourth biggest supermarket that falling food price inflation and tough comparative periods after two years of strong growth will knock sales growth figures in the second half was enough to prompt some modest profit taking.

Its shares, which have gained almost 20% in the past six months, fell 2% in early trading. They later recovered to close down just 0.8p or 0.3% at 283.7p.

Morrison chief executive Marc Bolland said: “We expect overall industry growth will slow on the back of low (food) inflation. However, as we previously indicated, we expect our sales to grow ahead of the market on a continuous basis.”

Some 3% of the sales rise was put down to the 1m new customers that are coming through its doors each week, notably in Scotland and southern England where the Yorkshire-based company had a low profile until recently.

It only established a major presence north of the border after its £3.3bn takeover of Safeway six years ago gave it nearly 60 stores in Scotland and a 15% market share.

Bolland claimed Morrison is taking customers from both upmarket and discount rivals. Importantly, it is pulling in affluent customers and younger families, notably to its Market Street offering of fruit, vegetables and in-store bakery, fishmonger and butcher, as Bolland seeks to expand the appeal of a brand that until recently struggled to convince customers of the quality of its goods.

Sales per customer also ticked up from £21.83 to £22.76.

Bolland claims the £2.5m upgrade given to each former Somerfield store is helping to boost sales by 50% on re-opening. Crucially for Morrison, it seems to show that it can make a success of stores that are as small as 10,000 sqft, a quarter of the size of a typical outlet.

This, Bolland said, means it can confidently open small stores in areas where it is hard to find a site.

“We have highlighted there are more than 100 locations we have identified.

“We can go there with a different kind of store,” said Bolland, who is prioritising new stores over opening an internet arm.

“If you haven’t seen Morrison you will not buy things online,” he said.

Finance director Richard Pennycook said the company had the sufficiently strong balance sheet to expand.

“If we were to invest further in the business we would not need to call on shareholders to do that,” he said.

Despite signs that the economy is turning, Bolland maintained that consumers are still after a bargain.

“We see very clearly that shoppers are still saying the number one thing they look at is value.”

He said that this is unlikely to change as the economy improves.

“People are price conscious these days and will stay much more conscious on price than before,” he said.

Sales of its Value range are up 60% year on year.

Bolland also reported a “more than double digits” rise in cake sales.

“That means people are giving themselves a treat,” he suggested.

Morrison has also seen its hot roasted chickens sales up 30% year-on-year.

But Bolland is clear that it is ready to quickly roll-out more up-market products when the economy has picked up.

Analysts are tipping Morrison to make a profit of £750m for its full financial year.

Wm Morrison: one of the supermarket sector’s big winners