Morrisons Reveals Disappointing Christmas Sales

LONDON -- Wm Morrison Supermarkets  (LSE: MRW  ) revealed poor sales in its Christmas trading update this morning, an announcement that many investors had predicted.

Excluding fuel, total sales declined by 0.9%, and like-for-like sales dropped off 2.5% in the six weeks to Dec. 30, 2012. Management acknowledged the disappointing sales performance, "notwithstanding these difficult market conditions."

Morrisons' financial position remains strong, with full-year net debt expected to be in the range of 2.1 billion pounds to 2.2 billion pounds. In addition, its two-year program to retire 1 billion pounds of equity is described as "well advanced."

Blame was attributed to a market where consumers are increasingly tightening their belts, shopping to a budget, and using vouchers and coupons to offset their food expenses.

Chief executive officer Dalton Philips commented: "Our 130,000 colleagues have done an outstanding job serving our customers great value food this Christmas and I would like to thank them for their dedication and hard work. In a difficult market our sales performance was lower than anticipated, but we have a strong business and significant opportunities to advance our strategy, as we accelerate our multi-channel offer."

The trading statement confirmed the supermarket's intention to improve its promotional innovation, highlighting its qualities compared to its rivals. Elsewhere, Morrisons will continue to focus on its relatively recent entry to other channels, including its online presence and the introduction of "M" convenience stores, an area where Tesco and J Sainsbury have reaped rewards in the past.

Interestingly, today also brought us news that Morrisons' share buyback program acquired 329 million shares at a cost of 931 million pounds. However, this puts the average price at 283 pence -- whereas the shares closed at 257 pence prior to this morning.

Whether you have faith in the company's management to turn the supermarket around and achieve success in 2013 and beyond is a subjective decision. The share price remained largely unmoved at the time of writing, while Morrisons currently offers a healthy yield of 4.6%, paying a dividend of 10.7 pence per share last year, and has promised a 10% raise this year. Its rivals' results, out later this week, will make for an interesting comparison and shed more light on how the sector is faring.

The U.K.'s fourth-largest supermarket sits outside City super-investor Neil Woodford's top 10 holdings, but it's the only supermarket he deems worthy of holding. For more high-yield share ideas and the names of the eight great dividend shares he favors, simply click here to have the report delivered to you immediately -- completely free of charge.

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