By James Davey

British supermarket group Morrisons reported a boost to sales in its latest quarter from the coronavirus lockdown, and said costs related to the pandemic should be broadly offset by the government's business rates relief.

Echoing recent comments from its larger rivals, market leader Tesco and Sainsbury's, Morrisons said on Tuesday the outcome for its full 2020-21 year was highly dependent on the length of the crisis and how customers respond as the country's lockdown eases.

It highlighted other impacts on profit such as the temporary closure of its significant café business, and a 70% slump in fuel sales since the lockdown started on March 23 as Britons make fewer car journeys.

Prime Minister Boris Johnson set out a cautious plan on Monday to get Britain back to work.

Shares in Morrions were up 3.3% at 0843 GMT, paring 2020 losses to just 3%, as analysts maintained their full year profit forecasts.

Morrisons said group like-for-like sales rose 5.7% in the 14 weeks to May 14, its fiscal first quarter, exceeding analysts' expectations with retail sales up 5.1% and wholesale revenue up 0.6%.

It said trading was "highly volatile", with consumers stocking up ahead of the lockdown, then the initial impact of lockdown as they ate into those stocks and weak Easter trading, followed by a significant improvement in recent weeks.

Group like-for-like sales were up 10.8% in the final two weeks of the quarter.

Jefferies analyst James Grzinic said these two weeks "provide a better indication of the new normal - the accretion to market size stemming from a channel shift from out of home to at home food consumption."

EXTRA COSTS

Morrisons has recruited an additional 25,000 workers to boost capacity and offset absenteeism of 20,000 during the crisis. Other extra costs include staff bonuses, quicker payments to small suppliers and the implementation of social distancing and safety measures. Those costs will be offset by 228 million pounds ($281.4 million) of business rates savings.

Last month Tesco estimated a hit of up to 925 million pounds ($1.1 billion) from the costs of dealing with the pandemic, while Sainsbury's warned the impact on current year profit could be over 500 million pounds.

Like rivals, Morrisons has significantly expanded its online offer during the crisis. It has more than doubled the number of weekly home delivery slots for the Morrisons.com business and expanded the Morrisons store on Amazon Prime Now service across London and to most major UK cities.

Prior to Tuesday's update analysts were on average forecasting for Morrisons an underlying pretax profit of 432 million pounds for the 2020-21 year, up from 408 million pounds in 2019-20.

"If we've anything to say about that, we're aware of our obligations and we would have said it," finance chief Michael Gleeson told reporters.

House broker Shore Capital kept its forecast of 435 million pounds.

"The group has strong liquidity (1.75 billion pounds revolving credit facility), a pension surplus, 87% freehold estate and modest non-lease debt," said Shore Capital analyst Clive Black.

($1 = 0.8103 pounds)

(Reporting by James Davey; editing by Sarah Young, Costas Pitas and Emelia Sithole-Matarise)