Christmas sales growth slows at UK's Morrisons as discounters thrive

* Morrisons misses analysts' Christmas sales forecasts

* Market data shows Aldi, Lidl performing strongly

* Asda best performer of big four, Tesco (Frankfurt: 852647 - news) solid

* Morrisons shares fall as much as 4.8 percent

* UK grocers' market share: https://tmsnrt.rs/2RCNN7f

(Adds detail, analyst comment, Kantar table, shares)

By James Davey and Kate Holton

LONDON, Jan 8 (Reuters) - Morrisons, Britain's No. 4

supermarket chain, reported weaker-than-expected Christmas sales

with growth slowing at both its retail and wholesale businesses,

as discounters Aldi and Lidl emerged as the major winners over

the festive period.

Bradford, northern England-based Morrisons has reported

three years of underlying sales growth, but its shares fell as

much as 4.8 percent on Tuesday after it missed analysts'

forecasts for overall Christmas trading.

Traditionally, British consumers have traded-up to Britain's

big four supermarket chains - market leader Tesco,

Sainsbury (Amsterdam: SJ6.AS - news) 's, Asda and Morrisons - as

well as upmarket players Marks & Spencer (Frankfurt: 534418 - news) and Waitrose

in the run-up to Christmas.

However, that pattern has changed in recent years as

German-owned Aldi and Lidl have invested heavily in, and

promoted, premium lines.

Market researcher Kantar Worldpanel said two-thirds of all

British households shopped at either Aldi or Lidl over the 12

weeks to Dec (Shanghai: 600875.SS - news) . 30, resulting in their highest-ever combined

Christmas market share of 12.8 percent.

Kantar and rival researcher Nielsen (EUREX: 11400372.EX - news) both reported

Walmart-owned Asda as the top Christmas performer among

the big four, followed by Tesco and Morrisons and with

Sainsbury's the laggard. However, all four lost market share to

the discounters.

Shares (Berlin: DI6.BE - news) in Tesco rose as much as 4.3 percent as its

performance was perceived as solid. Tesco is due to report on

Thursday and Sainsbury's on Wednesday.

On Monday, Aldi said December sales rose around 10 percent

to almost 1 billion pounds ($1.3 billion).

The march of the discounters has forced the big four to

reassess their strategies. They have cut prices and costs to

better compete, while No. 2 Sainsbury's has proposed a 7.3

billion pound takeover of No. 3 Asda to increase buying power -

a deal now being assessed by the competition regulator.

Morrisons and Tesco both launched another wave of price cuts

on Monday.

TOUGH NOVEMBER

Morrisons said its like-for-like sales, excluding fuel, rose

3.6 percent in the nine weeks to Jan. 6 - below analysts'

average forecast of 4.1 percent and growth in the previous

quarter of 5.6 percent.

Retail sales its stores rose 0.6 percent, compared with 1.3

percent in the previous quarter, while wholesale sales rose 3

percent, compared with 4.3 percent in the quarter before.

In common with other UK retailers, Morrisons highlighted a

change in consumer behaviour in November, amid uncertainty over

whether Britain will agree a negotiated withdrawal from the

European Union in less than three months' time.

"Going into November there was just a sense that customers

were a bit more cautious," Morrisons Chief Executive David Potts

told reporters.

"A feeling of uncertainty in the country may have led to

some of that feeling," he said, referencing "the macro/political

situation."

Britons have also had to cope with muted wage growth in

recent years, forcing them to rethink the way they shop.

"Shoppers (are) now opting to spend less on doing one big

shop; instead preferring more frequent, smaller trips to the

supermarket, spreading the cost across multiple retailers to

increase choice," said Mike Watkins, Nielsen’s UK head of

retailer insight.

Morrisons did, however, stick to its expectations for its

2018-19 financial year ending Feb. 3. Prior to Tuesday's update,

analysts were on average forecasting a 2018-19 pretax profit of

409 million pounds, up from 374 million in 2017-18.

With (Other OTC: WWTH - news) a disorderly Brexit a possibility, Potts said Morrisons

had stepped-up preparations, working with freight firms and

suppliers to check their state of readiness, particularly

regarding potential disruption and delays at ports.

Market share and sales growth (percent)

12 wks to 12 wks to pct change

Dec 30 2018 Dec 31, 2017 in sales

Tesco 27.8 28.1 0.6

Sainsbury's 16.2 16.5 -0.4

Asda 15.2 15.3 0.7

Morrisons 10.6 10.8 0.1

Aldi 7.4 6.8 10.4

Co-operative 5.9 5.8 3.2

Lidl 5.4 5.0 9.4

Waitrose 5.0 5.2 -1.7

Iceland 2.3 2.2 1.8

Ocado 1.0 1.1 1.3

Source: Kantar Worldpanel

($1 = 0.7829 pounds)

(Reporting by James Davey; Editing by Jane Merriman and Mark

Potter)