Morrisons, Britain's fourth biggest supermarket group, has raised its profit guidance as it beat forecasts with its strongest underlying Christmas sales for seven years, confirming its recovery under new management. 

The grocer said sales at stores open over a year, excluding fuel, rose 2.9% in the nine weeks to January 1, the bulk of its fourth quarter. 

That compared to analysts' average forecast of growth of 1.1% and third quarter growth of 1.6%. 

The firm said it now expected a 2016-17 underlying profit before tax to be ahead of consensus in the range of £330-340m. 

Before today's update analysts' average forecast was £326m, up from £302m in 2015-16. 

Former Tesco executive David Potts joined Morrisons as CEO in March 2015 with a remit to revive the group after it fell behind discounters Aldi and Lidl in its northern England heartland. 

He has reversed a loss of customers by cutting prices, improving product quality and availability and bolstering store standards and customer service, delivering a 55% rise in the firm's shares in 2016. 

All three of Britain's quoted major supermarkets, including Tesco and Sainsbury's, are expected to report solid Christmas trading following a recovery in 2016 that coincided with a slowdown in sales growth at the two big German discounters.