Morrisons and Tesco today reported sharp declines in sales after 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 were down 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.
Morrisons shares slumped seven per cent after the update, which was described as “quite awful” by Clive Black, retail analyst at Shore Capital.
The supermarket admitted the Christmas period had been “very challenging”.
Chief executive Dalton Philips said: “In a very tough market our sales performance over Christmas was disappointing.”
Tesco shares fell two per cent 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 £1bn 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 £450m from internet shoppers over the six week Christmas period, up 14 per cent on a year earlier.
Overall, Tesco said it is on track to meet the City’s profit forecasts of between £3.1bn and £3.4bn for the year to April.
However, the disappointing sales update will increase the pressure on chief executive Philip Clarke’s £1bn 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.”