Tesco and Morrisons see sales slide

Morrisons is aiming to cover half of Britain with its online shopping service by the end of 2014

Like-for-like sales at Morrisons have fallen 5.6%, in the six weeks to 5 January, sending shares tumbling by 7%.

It said a lack of online presence and competition by cut-price shops, such as Lidl and Aldi, were behind the fall.

Tesco's like-for-like sales also fell, down by 2.4% during the Christmas period, and its shares fell by 4%.

The supermarket giant said the fall was partly due to a "weaker grocery market" in the UK.

Morrisons said it had seen a "disappointing" performance because of difficult market conditions and the rival discounts. The like-for-like sales figures exclude new stores.

In a statement, the supermarket 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."

Morrisons moves online

The BBC's business editor Robert Peston said:"A retailer without a substantial online presence... is on a fast road to obsolescence."

During a conference call with analysts, Dalton Philips, chief executive at Morrisons, said the supermarket's overlap with discounters was "significant", adding the threat posed "quite a challenge".

The supermarket chain predicted its full-year profit would be at the "bottom of the range of current market expectation".

Will Hedden, sales trader at spread-betting firm IG, said: "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."

Yorkshire-based Morrisons is set to enter the online shopping market on Friday, as it launches a trial in Warwickshire, covering parts of the Midlands.

Tesco said opening more of its smaller, express stores would help to remedy the fall in sales

It aims to provide 50% of the country with an online facility by the end of 2014, a spokesperson for Morrisons said.

Smaller distribution centres are planned in Yorkshire, London and the North West.

Tesco's performance

Tesco also said overseas sales were down 0.7%, citing political instability in Thailand as partly behind the fall.

Philip Clarke, chief executive at Tesco, said its move to open fewer stores in the UK was also behind the sales drop.

He said focusing on opening smaller, express stores in the UK would help.

Mr Clarke added: "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."

Tesco said its website had done well over Christmas, with a 14% rise in the number of UK online sales.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said Tesco's competitors, the discount retailers had "loudly announced their arrival", while the supermarket's investment in its store revamp would continue to help profitability.

But he praised the strong performance of Tesco's website and its effort to concentrate on smaller stores, which bought a "record" trading day.

Responding to the news of today's retail figures, Chancellor George Osborne said it showed that the industry is "very competitive" and that the "economic recovery is not yet secure."

"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.

"That is exactly what our economic plan is designed to deliver."