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9 January 2014

Five questions answered on Tesco’s and Morrisons’ Christmas sales slide

Why did supermarket sales take a hit?

By Heidi Vella

Morrisons and Tesco have reported a fall in their Christmas sales. We answer five questions on both supermarkets’ lacklustre sales.

By how much has Tesco’s and Morrisons’ sales fallen?

In the six weeks to January 5 2014 Morrisons’ like for like sales fell 5.6 per cent, causing its shares to plummet by 7 per cent.

Tesco’s like-for-like sales fell by 2.4 per cent over the festive period. It’s shares fell by 4 per cent.

What have the companies attributed these weaker sales to?

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Morrisons believe its sales were weak due to a lack of online presence, as well as competition by cut-price shops, such as Lidl and Aldi. The supermarket is set to enter the online shopping market on Friday, when it will launch a trial in Warwickshire, covering parts of the Midlands.

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Tesco simply said the fall in sales was due to a “weaker grocery market” in the UK.

What else did the supermarket giants say?

Morrisons said it was “disappointed” by the sales. In a statement the retailer said:

“The difficult market conditions were intensified for Morrisons by the accelerating importance of the online and convenience channels, where Morrisons is currently under-represented, and by targeted couponing which was particularly prevalent in the market this Christmas.”

Tesco, which also saw a 0.7 per cent fall in its overseas sales, said its move to open fewer stores in the UK was also behind the sales drop.

Philip Clarke, chief executive at Tesco, said: “Our overseas performance has improved since the third quarter, driven by an improving trend in Europe. This is despite continuing external challenges, including the recent political disruption in Thailand.”

What have the experts said?

Will Hedden, sales trader at spread-betting firm IG, told the BBC: “There is the impression that more and more business is going online, and Morrisons has been slow to come into that area.

“Their online offering is going to need to become pretty good, pretty quickly to compete.”

While George Osborne took the release of the figures as an opportunity to say they showed that the industry is “very competitive”.

“We have to work through the long-term economic plan that is turning Britain around and we need to make sure we get balanced growth across the whole country and we get investments and exports alongside consumer spending,” he told the BBC.

How did the other big supermarkets do over Christmas?

Sainsburys posted its lowest growth figures for nine years prompting the company to scale back its growth forecast for 2014. It reported this week that its sales had increased by just 0.2 per cent in the 14 weeks to January, despite prices rising by some 2.5 per cent.

Waitrose, on the other hand, revealed on Wednesday a 3.1 per cent rise in underlying sales in the five weeks to Christmas Eve. This was boosted by a 33 per cent rise in online grocery sales.

Co-op reported a 1 per cent rise in underlying sales at its grocery stores in the 13 weeks to 4 January.