Morrisons Christmas sales up 1%

Wm Morrison Supermarkets (MRW.L) struck a sombre tone about prospects for 2011, with food prices on the rise and household budgets under pressure, as it posted a modest rise in Christmas sales.

Chief Executive Dalton Philips said on Monday there had been a small uptick in grocery price inflation over Christmas, and that trend was set to continue this year.

But with consumers struggling to cope with rising taxes and public spending cuts, the onus would be on retailers and suppliers to become more efficient to offset the rising costs.

"It's a tough market out there," Philips told reporters, adding he thought food price rises would be relatively modest this year compared with the surges seen in 2008-9.

Online grocer Ocado (OCDO.L) sounded much more upbeat, however, saying it expected the trend towards internet shopping to help it overcome any economic headwinds.

"Your are seeing an acceleration of customers going online for their groceries," Finance director Andrew Bracey told Reuters after Ocado reported a 26.7 percent rise in gross sales for the four weeks to December 26.

Retailers have so far reported mixed fortunes over Christmas, with severe winter hitting many of them hard, but those with strong online businesses faring better.

Department stores group Debenhams (DEB.L) said on Monday snow took the shine off its Christmas, while rival House of Fraser posted a stronger performance and Shop Direct, the online and home shopping firm that owns the Woolworths.co.uk and Littlewoods brands, said sales rose 5 percent.

BATTLEGROUND

Morrisons, Britain's fourth-biggest grocer behind market leader Tesco (TSCO.L), Wal-Mart's Asda (WMT.N) and J Sainsbury (SBRY.L), said sales at stores open over a year rose 1 percent excluding fuel and VAT sales tax in the six weeks to January 2.

That was down on the 1.3 percent rise reported in its last quarter, due partly to a much stronger comparable figure the same time the year before, but above the average forecast for a 0.6 percent increase in a Reuters poll of 14 analysts.

"OK ... but we'd hoped for a tad more," said Arden Partners analyst Nick Bubb.

Market researcher Nielsen said on Friday grocers had a good Christmas, with Sainsbury's leading the top four players.

Analysts expected Morrisons to be hampered by its greater exposure to the less affluent north of Britain, which was also hit hardest by bad weather. Sainsbury will publish Christmas figures on Wednesday and Tesco on Thursday.

Philips said Morrisons saw a surge in demand for premium products, such as smoked salmon and panettone, and also saw an increase in customers using its "collector card" scheme which offered regular customers money off their Christmas shopping.

Source : Mark Potter - Reuters