Morrisons today brought forward its planned Christmas trading update to inform the City of its 5.6% fall in like-for-like sales over Christmas. Retail Week rounds up the reaction.

“Morrisons’ trading problems appear to have mounted; in a quarter when it had been flagging it expected a return to LFL sales growth. Christmas trading saw LFL’s ex fuel decline by a whopping 5.6%, against our forecast of -2% for the quarter as a whole. After cutting our forecasts by 3% at the start of this week, we cut forecasts by a further 3% today.” – Graham Jones, Panmure Gordon

“The big shock today is that Morrisons have had to bring their Xmas update forward from the 20th because of awful Christmas trading, warning that full-year profits will be towards the bottom of the range, after -5.6% like-for-like in the last five weeks (despite extra trading hours). Despite pretty low expectations and the dividend yield support the shares will be hit today.” – Nick Bubb, independent

“Morrison has surprised us with a quite awful trading update. Hard pressed consumers have decided to shop elsewhere leading to six week trade to the 5th January down by 1.9% in total and like-for-like sales 5.6% lower. Such trade is a million miles away from management’s aspired positive Q4 like-for-like sales. If we take inflation into account then the volume position is truly disastrous, with negative operational gearing, compounded by vertical integration, eating into margin.” – Clive Black, Shore Capital

“We expect a softer market to have partly contributed to Morrisons woes. More importantly, however, the group seems to have lost out on its usual share of festive trading (in addition to no online offer and a very limited convenience presence). A more fully ranged Christmas offer at discounters and a very aggressive (but targeted) couponing at the other majors seem to have been key. It will take time to understand whether these headwinds fall-off as we exit the festive period.” – James Grzinic, Jefferies

“Christmas has proved to be a very challenging period for the UK food retailers – consumers appear to have been shopping later and Morrison comments that targeted couponing has been particularly prevalent.  Another trend over the Christmas period has been the strength of multichannel retailing – which has been more of a drag for Morrison where presence in convenience and online is limited at this stage.  The online platform is due to launch tomorrow but it will take some time for online to have a visible impact.” – James Anstead, Barclays

“Though we are disappointed by Morrisons’ recent trading performance, we believe it is enacting the right changes, though perhaps not aggressively enough. We expect Morrisons at some stage will develop a rewards programme in order to drive customer loyalty and abate the loss of share to the discounters. We continue to like Morrisons’ development of its multi-channel strategy and focus on capital discipline hence our Buy rating. However, in the near term we think it unlikely that the shares will benefit from a re-rating until the recovery in core LFL sales appears.” - Xavier Le Mené, Merrill Lynch