Morrisons has confirmed its first fall in profits for seven years but also plans to launch online in 2014 as it attempts to catch up with rivals.
The supermarket chain's chief executive Dalton Philips had pledged to drive a turnaround after sales plunged over the crucial Christmas trading period.
The dip contributed to a 7% fall in pre-tax profits to £879m - with like-for-like sales down 2.1% in the year to February 3.
Mr Philips admitted Morrisons had not done enough to communicate its promotions and suffered because it still lacked a meaningful presence in the two fastest growing sectors of the market - online and convenience.
As part of its online ambitions, Morrisons and Ocado confirmed a story by Sky's City Editor Mark Kleinman that talks were continuing over plans to share the online retailer's warehouse capacity and technological expertise.
Morrisons said the outcome of the discussions would have no bearing on the launch of its web food offer by January 2014.
Unlike the other grocers that make up Britain's so called "big four" - market leader Tesco (Other OTC: TSCDY - news) , Wal-Mart's Asda and J Sainsbury - only Morrisons currently does not have a website for the home delivery of food.
It has also lagged behind in the roll-out of convenience stores. However, since Christmas Morrisons has bought dozens of sites from collapsed chains HMV, Blockbuster and Jessops which it plans to bring under a 'Morrisons M Local' brand.
Mr Philips confirmed his intended investment plans for online and local stores after the group's like-for-like sales fell by 2.5% over the festive season - compared to a 1.8% increase for Tesco, which had itself previously been struggling.
He said: "The sustained pressure on consumer spending was reflected in our like-for-like sales performance, which was not as good as it should have been."
In a later conference call with investors, Mr Philips warned that he expected like-for-like sales to be "principally negative" this year but he said Morrisons' promotional effectiveness had been "noticeably sharper" since November (Xetra: A0Z24E - news) .
He refused to give more details on his plans for the online food service, saying he did not want to alert competitors to the model the company would follow.
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