Morrisons is set to step up its convenience store rollout in London and launch a new online wine business, the retailer revealed today as it reported a 0.9% drop in like-for-like sales for the six months to 29 July.

The retailer’s pre-tax profits fell 2% to £440m although this was not as bad as many analysts had predicted, with consensus forecasts around £434m.

CEO Dalton Philips said Morrisons planned to open a new bespoke 100,000 sq ft distribution centre in Feltham, West London that will have the capacity to service 100 M Local convenience stores, marking a departure from the current hub and spoke distribution system whereby it five existing  c-stores are supplied via the nearest large Morrisons superstore.  The DC is expected to be fully operational by February.

Philips added that Morrisons would have 15 M Local stores open by the end of the year.

It will start selling wine online later this year when it launches Morrisons Cellar. Philips said the retailer would use its Kiddicare technology platform with orders fulfilled from its distribution centre in Peterborough.

“We already sell around £600m worth of wine a year, so there is a lot of opportunity to grow this business,” said Philips.

He defended Morrisons’ fresh format strategy, which some analysts claim is alienating its core customers.  He said that Morrisons would have over 100 fresh format stores by the end of the year and that the average 4%-6% uplift in sales generated was clear evidence that it was not losing shoppers and that the new formats were also attracting new customers.

“Although the sustained pressure on consumer spending was reflected in our like-for-like sales performance, we have made further good progress against our strategic objectives – the building blocks which are the foundations of the future success of our business<” said Philips.