Morrisons' Christmas sales disappoint

Supermarket chain Morrisons admitted today that its Christmas sales were below par after feeling the heat from rivals in a “highly promotional” market.

The UK's fourth-biggest grocer, which employs around 130,000 staff at 455 stores in the UK, reported a 2.5% decline in like-for-like sales for the six weeks to December 30, a performance it labelled as disappointing.

Despite the latest drop in sales, which follows a 2.1% decline in the previous quarter, Morrisons said it remained on track to meet profit expectations.

Analysts believe Morrisons has struggled to compete because of its lack of grocery delivery service and small number of convenience stores.

Competition in the sector over the Christmas period has been as fierce as ever, with the big players focused on promotional deals and money-off coupons.

Tesco sharpened its performance after a disastrous 2011 and is likely to show a modest return to like-for-like sales growth later this week, while Sainsbury's will also be up by about 1% in sales figures on Wednesday. Morrisons has also been squeezed by further strong growth from discounters Aldi and Lidl.

Morrisons said: "The environment over the Christmas period has continued to be challenging with hard-pressed consumers increasingly shopping to a budget and vouchering a prominent feature of a highly promotional market."

However, the Bradford-based company admitted it has not done enough to advertise its promotions and communicate its points of difference.

Chief executive Dalton Philips recently announced an advertising deal with TV presenters Ant and Dec and sponsorship of hit shows Britain's Got Talent and Ant & Dec's Saturday Night Takeaway in a bid to promote the chain's fresh food credentials.

A move into online shopping is expected later this year, while the company hopes to have 70 convenience stores by the end of 2013.

Mr Philips praised staff for achieving good availability of produce and high standards of service during the festive peak period.

However, he added: "In a difficult market our sales performance was lower than anticipated, but we have a strong business and significant opportunities to advance our strategy."

Analysts noted that profit forecasts for Morrisons were already coming down in the City before the disappointing update.

Seymour Pierce stockbrokers responded by knocking another £10 million from its forecast for the year to the end of January, taking the figure to £880 million, and has cut the 2014 figure by 8% to £850 million.

Its retail analyst Freddie George said the sales fall came despite softer comparatives with a year earlier.

He added: "Its fresh focus has perhaps taken the offer too far away from its traditional value roots and we are not convinced there is a fresh/craft differentiated niche to be carved out.

"With catch-up investment needed in convenience and online, we expect Morrisons to continue to underperform the industry in the year ahead."

PA