January 7, 2020 / 7:27 AM / 13 days ago

UPDATE 2-Cautious consumers push sales down at British supermarket Morrisons

* Morrisons underlying sales down 1.7% in 22 weeks to Jan. 5

* Industry data shows all supermarkets struggled

* Cost control keeps firm on track for profit forecasts (Adds broader industry data, shares)

By James Davey

LONDON, Jan 7 (Reuters) - British supermarket Morrisons reported another fall in underlying sales over Christmas as a tough economic backdrop and sustained consumer uncertainty deterred shoppers from splashing out.

The country’s fourth largest supermarket group said underlying sales, excluding fuel and sales tax, fell 1.7% in the 22 weeks to Jan. 5 - a period that included Morrisons third quarter and the nine-week Christmas trading period.

The outcome was better than feared however, with analysts forecasting a decline of 2.2% from the year earlier period, and Morrisons said it was still on track to make analysts’ full year profit forecasts.

“It was encouraging that during an unusually challenging period for sales, our execution was strong and our profitability robust, demonstrating the broad-based progress we have made during the turnaround,” Chief Executive David Potts said.

Potts joined Morrisons in 2015 to lead a recovery after it was damaged by the rise of German-owned discounters Aldi and Lidl and previous management mistakes. His turnaround has focused on more competitive prices, improved product ranges and availability as well as better customer service in refurbished stores.

The run up to Christmas marks the most important - and competitive - time of the year for British supermarkets when market leader Tesco, Sainsbury’s, Walmart’s Asda and Morrisons battle for every pound.

In recent years all four major groups have had to fight off the challenge from Aldi and Lidl, which are continuing to open new stores at a rapid pace. The discounters are also selling more premium products, making them more competitive over Christmas.

Industry data from research group Nielsen showed that supermarkets experienced the lowest growth over the key Christmas period since 2014, with sales growing by just 0.5% year-on-year in the four weeks to Dec. 28.

While consumers visited supermarkets more often over the 2019 Christmas period, shoppers purchased fewer items and spent less each time, it said.

On Monday Aldi UK reported a 7.9% increase in total sales in the four weeks to Dec. 24 and said its like-for-like sales were positive.

Morrisons said a tight control on costs meant it expected to report profit for the full 2019-20 year within the current range of analysts’ forecasts.

The company has also sold a large site in Camden, north London, for 120 million pounds ($158 million).

Sainsbury’s will update on Christmas trading on Wednesday and Tesco on Thursday.

$1 = 0.7609 pounds Reporting by James Davey; editing by Kate Holton, Kirsten Donovan

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