Morrisons in profit dumps with a festive sales slump

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Morrisons and Tesco emerged as festive retail losers following a sharp decline in sales after what they described as a “very challenging” Christmas for the supermarket sector.

Bradford-based Morrisons reported a worse than expected 5.6 per cent decline in like-for-like sales and warned that profits will fall short of City expectations.

The company said consumers had managed their budgets very tightly and were shopping across a range of formats and retailers.

Industry leader Tesco said like-for-like sales fell 2.4 per cent in the six weeks to January 4.

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

The German discounters both reported “record” trading in the UK over Christmas, heaping the pressure on rivals Tesco, Asda and Morrisons.

In a surprise trading update, Morrisons blamed a combination of shoppers failing to trade up from the discounters over Christmas, its lack of online and convenience stores and the proliferation of vouchers offering mass discounts from rivals.

The group hopes to overcome these issues by launching its first online service today, a ramp up in convenience store openings and a new loyalty scheme which it will trial over the next six to eight weeks.

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

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

Marks & Spencer, which started out as a penny bazaar in Leeds 130 years ago, suffered its tenth consecutive quarter of falling

clothing sales over the festive period. Sales at the beleaguered homewares and clothing division slumped 2.1 per cent.

The group admitted that a series of discounts to drive seasonal sales - which included a pre-Christmas “Mega Day” with reductions of up to 30 per cent on clothing lines - would hit profit margins when full-year results are reported later this year.

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