Morrisons expected to announce Christmas sales slump

Forcasters predict Morrisons will reveal the worst results of the big supermarket groups, with 2.5% drop in like-for-like sales

Morrisons is expected to report the worst Christmas trading of the big supermarket groups on Monday as the recession chills customer spending in its northern heartlands.

Economic hardship, competition from budget chains Aldi and Lidl and the lack of an online offering have prompted analysts to forecast that the country’s fourth largest grocer had suffered a 2.5% like-for-like sales decline over the festive period.

Morrisons, whose numbers will be the first in a wave of updates from supermarket groups this week, has been affected by the growing popularity of online shopping among better-off customers. Many of its shoppers are abandoning the weekly supermarket trek in favour of home delivery, while its lack of smaller convenience stores means it is also missing out on top-up food purchases.

The supermarket has suffered a tough year, with sales falling 2.1% in the third quarter of 2012. Chief executive Dalton Philips has claimed the UK is now two countries, with his northern customers watching their pennies, even buying two times their usual amount of bread in order to freeze it and take out a slice at a time. “People I meet in the south-east are surprised when I tell them half of our customers are checking the price of every single item,” he said last year.

John Kershaw, retail analyst at BNP Paribas, said Morrisons may have to issue a profits warning. “There is a risk that, with convenience and online startups to roll out, and with the core estate significantly underperforming, Morrisons may announce that it needs to invest more in its offer,” Kershaw said.

Tesco is expected to report a revival in its fortunes on Thursday, leading the pack with a 1% increase in Christmas sales at stores open for at least a year, according to a poll of 10 analysts by Bloomberg.

Tesco’s figures will in part look good because of a weak Christmas 2011, when sales fell 2.3% and the company was forced to issue its first profits warning in more than 20 years.

The rebound may have impacted Sainsbury’s, which on Wednesday is expected to report a 0.9% increase, lower than the prior quarter’s 1.9% gain and behind Marks & Spencer’s food department, which may show a 1% rise on Thursday despite a 1% fall in its clothing sales.

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