Morrisons sales fall in tough UK market

Morrisons, which trails market leader Tesco, Wal-Mart's Asda and J Sainsbury in UK market share, said on Thursday sales at stores open over a year fell 1.0% excluding fuel in the 13 weeks to April 29.

That was bang in line with analysts' average forecast, according to a company poll, and compared with a fourth quarter rise of 0.7%. Total sales, excluding fuel, rose 1.5%.

"The economic environment for the consumer has remained challenging, with the high price of oil and other commodity prices putting pressure on disposable incomes," said the firm. It was confident of achieving continued profitable growth.

Morrisons was up against tough comparative numbers as in the same period a year ago like-for-like sales rose 2.5% with spending boosted by an exceptionally warm Easter and celebrations surrounding a royal wedding.

But analysts reckon the firm may have lost share to Tesco, after the market leader stepped-up vouchering in the wake of its January profit warning, as well as Asda and discounters Aldi and Lidl.

Many retailers are struggling as consumers grapple with higher prices, muted wage growth and government austerity measures, and worry about job security, a shaky housing market and fallout from the euro zone debt crisis.

Data last week showed Britain is back in recession, prompting fears of a fresh fall in consumer confidence, while high oil prices have raised doubts about whether inflation will continue to fall back from last year's highs.

"The uncertain economic background is expected to remain challenging for the consumer and accordingly the board remains cautious," Morrisons said, adding its financial outlook for the year remains unchanged.

As well as modernising its core chain, Morrisons, which runs nearly 500 superstores and, unlike rivals, produces much of the food it sells, has been diversifying into non-food, e-commerce and M local convenience stores.