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* CEO says has stabilised business
* Second straight quarter of underlying sales growth
* On course for first profit growth in five years
* Has made first deliveries to Amazon
* Shares up 2.1 pct (Recasts, adds CEO, analyst comment, shares)
By James Davey
LONDON, May 5 (Reuters) - The boss of Morrisons saidon Thursday he had achieved his first major objective sincejoining the British supermarket a year ago - stabilising thebusiness.
"We are stabilising Morrisons and selling more things tomore customers. It's the first important step on the journey tofix, re-build and grow this company," David Potts, a formerTesco executive, who joined Morrisons in March 2015,told reporters.
Potts has cut prices, improved store standards, tailoredproducts to local tastes and sharpened up marketing todifferentiate Morrisons from rivals.
Britain's fourth largest grocer is unique among its majorcompetitors in making half of all the own brand and fresh foodit sells.
Shares in Bradford, northern England, based Morrisons,already up 10 percent over the last three months, were up 2.1percent by 0957 GMT.
"At a time when investors' attention is shifting to the longterm implications of Amazon's market entry, Morrisonsis more insulated than peers from this incremental attritionrisk," analysts at Jefferies said in reference to the U.S.online giant's plans to attack Britain's grocery market.
Morrisons, which trails market leader Tesco, Sainsbury's and Asda in annual sales, has been badly hurtby the rise of German discounters Aldi and Lidl and profits have fallen for four years in a row.
RETURN TO PROFIT
But having posted a second consecutive quarter of positivelike-for-like sales it is on course for profit growth in its2016-17 year. Analysts are on average forecasting an underlyingpretax profit before one-off items of 318 million pounds ($461million), up from 302 million pounds in 2015-16.
Morrisons said sales at stores open over a year, excludingfuel, rose 0.7 percent in the 13 weeks to May 1, its fiscalfirst quarter.
That was ahead of analysts' forecasts of flat sales and arise of 0.1 percent in the previous quarter which was its firstquarterly rise in four years.
The quarterly like-for-like sales outcome was helped by a 1percent contribution from online.
Morrisons' like-for-like transactions grew 3.1 percent inthe quarter, while volume growth was 3.3 percent. Deflation,including the supermarket's own price cuts was 2.6 percent.
Last week, Morrisons lowered the prices of 847 items,including sugar, rice and cereals.
Echoing recent comments from Tesco and Sainsbury's itexpects deflation to persist through 2016.
Potts surprised the market in March by announcing awholesale supply deal with Amazon and agreeing the outline of anew deal with online grocer Ocado to serve its ownmorrisons.com online offering.
The CEO said Morrisons has made its first deliveries toAmazon. He said negotiations with Ocado to finalise a newagreement were continuing but stressed the deal must deliver"profitable growth online for Morrisons."($1 = 0.6904 pounds) (Editing by Greg Mahlich and Jane Merriman)
