Morrisons chief Philips sees "very low like-for-likes" for UK food retailers in 2012

Morrisons chief Philips sees "very low like-for-likes" for UK food retailers in 2012

Morrisons, the UK's number four grocer, kicked off a week in which the country's largest food retailers will report on their Christmas performance with slowing sales growth. And the company's predictions for 2012 would have made difficult reading.

It can be difficult to feel upbeat on a Monday morning in January and, although Morrisons chief executive Dalton Philips tried hard today, there was no mistaking the caution with which he and the UK's fourth-largest food retailer are viewing 2012.

This morning, Morrisons was the first of the UK grocers to reveal how it had fared over Christmas. It reported a 0.7% increase in like-for-like sales for the six weeks to 1 January and, despite Philips claiming he was "pleased" with the company's performance, it is clear that even the best-performing of the UK's Big Four retailers in recent years is finding the going tough.

Morrisons' like-for-likes have slowed, with Philips pointing to continued weak consumer confidence. Shoppers, he said, put fewer items in their baskets when they did their Christmas shop and the food and drink they did buy betrayed how many closely many are watching their wallets. Champagne sales volumes fell 7%, while sparkling wine sales doubled. Pork sales jumped as consumers looked to supplement the turkey joints they bought with a cheaper protein. Households, Philips noted, are wasting less food than before. Around 43% of products on sale in Morrisons during the week before Christmas were on promotion, he said. It all added up to what Morrisons described as a "challenging" Christmas period.

Philips and Morrisons finance director Richard Pennycook admitted that the retailer's rivals would have benefited from their greater number of convenience stores and their presence in the online channel. Morrisons is set to open only its third c-store next week and is yet to launch an Internet food offer. However, expect Morrisons to move in both channels and the market should hear more from the retailer when it reports its annual results in March.

This week, Sainsbury's and Tesco will announce how they performed over the festive period. Some industry watchers believe Sainsbury's is set to report an increase in like-for-like sales, while some analysts predict Tesco will file a fall in like-for-likes. Shore Capital has described Tesco as the "laggard" of the Big Four and has forecast flat like-for-like sales at best or a 1% fall at worst. Analysts at Nielsen believed that, of the Big Four, Asda saw the fastest growth in sales over Christmas. Nielsen's data, which takes in the four weeks to 24 December, also claimed Aldi's sales jumped over 40% (remember, however, that these are not like-for-like numbers but also include the impact of new stores).

Whatever numbers do emerge will provide a vital barometer for all those operating in the UK food industry and, to an extent, provide lessons for manufacturers and retailers operating in similarly challenged economies, which, let's face it, takes in much of the Western world right now. And the industry will be waiting to hear just how Sainsbury's chief executive Justin King, Tesco boss Philip Clarke (and Marks and Spencer chief Marc Bolland, who announces the UK retailer's third-quarter sales tomorrow) see the prospects for the sector and the UK economy in the year ahead.

At Morrisons, Philips said UK food retailers will continue to see low sales growth this year. "With consumer confidence at a generational low, you're going to a sector that has very low like-for-likes," he said. "You've got to see a sector that's in the 1-2% [growth range]. I don't see it as being much higher than that." Pennycook said the outlook for 2012 suggested the challenging trading conditions seen in 2011 would continue. "We've talked consistently through 2011 about how hard it was for our customers. As we roll into 2012, we think it will be more of the same. The hope is that some of those inflationary pressures start to ease off a bit but we're not anticipating a return to high growth in 2012."