Cold Christmas as Tesco and Morrisons see sales fall

Morrisons rerported sharp declines in sales after a "very challenging" Christmas for the supermarket sector.

Industry leader Tesco said like-for-like sales were down 2.4% in the six weeks to January 4, while a fall of 5.6% at Morrisons led the Bradford-based chain to warn that profits will be short of some City hopes.

Morrisons said consumers had been managing their budgets very tightly and were shopping across a range of formats and retailers.

The latest downbeat figures from the sector come amid recent market share gains for discount rivals Aldi and Lidl.

Morrisons shares slumped 7% after an update described as “quite awful” by Clive Black, a retail analyst at Shore Capital Stockbrokers.

The supermarket admitted the Christmas period had been “very challenging”. Chief executive Dalton Philips added: “In a very tough market our sales performance over Christmas was disappointing.”

Tesco shares were 2% lower following its Christmas update.

The retailer blamed the weaker grocery market for its latest decline in UK like-for-like sales, although it said it still took £1 billion in sales in the five days before Christmas, including its biggest ever trading day.

Unlike Morrisons, which has still to break into the online grocery market, Tesco said it generated £450 million from internet shoppers over the six week Christmas period, up 14% on a year earlier.

Overall, Tesco said it remains on track to meet the City’s profit forecasts of between £3.1 billion and £3.4 billion for the year to April.

However, the disappointing sales update will increase the pressure on chief executive Philip Clarke’s £1 billion turnaround plan for the UK.

Tesco is scrapping more than 100 major UK store developments and focusing growth on convenience stores and its online offering, while also looking to transform stores into family-friendly retail destinations.

Mr Clarke said that with household incomes growing slower than inflation, families feel they have less to spend than they did last year and in previous years.

He added: “While families still treat themselves and parents always want to give their children a good Christmas, budgets remained constrained and optimism around the economy and house prices led to slightly more borrowing on credit cards.”