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Morrisons' Sales Fall Ahead Of Xmas Battle

(c) Sky News 2012

Morrisons supermarket chain says customer confidence remains "fragile" as it reports a fall in underlying sales.

The UK's fourth largest grocer said sales at stores open for over a year, excluding fuel, fell 2.1% in the first three quarters of this year.

It compares with a fall of 0.9% in the first half, and total sales, excluding fuel, were down 0.4%.

"With consumer confidence still fragile and high levels of promotional activity a persistent feature of the market, the trading environment has remained challenging through the period and sales were lower than anticipated," the chain said in a statement.

It added that it expects the environment to "remain challenging" over the rest of the year, but that its financial performance will be in line with expectations.

Industry data released by Kantar Worldpanel showed Morrisons, which has 450 stores, lagging behind its three big rivals: Tesco (Xetra: 852647 - news) , Sainsbury (LSE: SBRY.L - news) 's and Asda.

The figures also show it missing out on the sales growth seen by smaller chains, including discounters Aldi and Lidl.

It means competition this Christmas - when supermarkets battle to cash in on the festive spending rush - will be tougher than ever.

In response, Morrisons promised customers they could buy their Christmas lunch groceries for £2.49 per head as part of its "Dreaming Of A Tight Christmas" campaign. 

Retail analysts Conlumino said the supermarket needed "short term remedies" to help quash its loss of market share to rivals.

"A resurgent Tesco is discounting and vouchering extensively, the deep discounters continue to gain ground and Asda is pushing its 'everyday low price' message harder than ever," senior consultant Joseph Robinson said. 

"Against this backdrop Morrisons – whose customers remain more price sensitive than average – has simply lost ground and lost footfall and spend to other players."

He added: "The key challenge going forward will be to balance longer term aspirations and strategies with shorter term tactics to drive footfall and spend."

Following the news, Morrisons' share fell over 1%, while rival Tesco's were up over 1.6% making it the biggest riser on the FTSE 100 (FTSE Index: EO100.FGI - news) in early trading. 

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