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Morrisons Sees Sales Drop Over Christmas

(c) Sky News 2013

Morrisons has revealed it had a "disappointing" Christmas period with like-for-like sales, excluding fuel, down 2.5% in the six weeks to December 30.

The supermarket chain appears to have been the big loser in the so-called supermarket war over the festive period.

The UK's fourth-biggest grocer, which has 455 stores in the UK, admitted it was "disappointing".

The group said the Christmas period had continued to be challenging, with customers shopping to a budget and relying on vouchers in a "highly promotional" market.

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

The firm said: "2012 was difficult for the consumer and the sales environment has proved to be challenging.

"Through the self help available to us we have managed our business tightly and accordingly the board believes that our full year performance will be broadly in line with its expectations."

Morrisons said it placed renewed emphasis on altering its broader strategy.

These may include greater online offerings and opening of smaller convenience stores.

Unlike its competitors, Morrisons does not offer an online shopping service.

Analysts believe the supermarket has struggled to compete with its rivals because of its lack of grocery delivery service and small number of convenience stores.

Investment bank Jefferies International said it now believes Morrisons is a buy target in the coming months.

"The major challenges which have become more visible in recent months - namely the lack of exposure to convenience and online - continue to impact trading form," Jefferies said in a statement.

Consumers are increasingly turning towards 'click and collect' online shopping, and for those living in built-up areas convenience stores have become the outlet of choice.

Dalton Philips, Morrisons' chief executive officer, admitted the firm's festive sales performance was "lower than anticipated".

He said: "Our 130,000 colleagues have done an outstanding job serving our customers great value food this Christmas and I would like to thank them for their dedication and hard work.

"In a difficult market, our sales performance was lower than anticipated, but we have a strong business and significant opportunities to advance our strategy, as we accelerate our multi-channel offer," he added.

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

Last week, the company announced a brand endorsement and sponsorship deal with Geordie duo Ant (Taiwan OTC: 3646.TWO - news) & Dec to promote the chain's fresh food credentials.

The TV stars will front Morrisons' 2013 advertising campaign, and the supermarket will sponsor their shows Britain's Got Talent and Ant & Dec's Saturday Night Takeaway as part of the deal with broadcaster ITV (LSE: ITV.L - news) , FreemantleMedia Enterprises, Syco and James Grant management.

Sainsbury (LSE: SBRY.L - news) 's reports third-quarter sales on Wednesday, while Tesco (Other OTC: TSCDY - news) publishes Christmas figures on Thursday.

Tesco sharpened its performance after a disastrous 2011 and is likely to show a modest return to like-for-like sales growth, while Sainsbury's is expected to be up by about 1% in sales figures.

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