By James Davey
LONDON (Reuters) - Morrisons, Britain's fourth biggest supermarkets operator, reported another fall in quarterly underlying sales on Thursday, hit by its own price cuts and a move to wean itself off money-off vouchers.
The company, which trails market leader Tesco (L:TSCO), Wal-Mart's Asda and Sainsbury's in annual sales, has not reported positive underlying sales since the fourth quarter of its 2011-12 year.
Former Tesco executive David Potts joined as chief executive in March, tasked with reviving Morrisons' fortunes. But he warned in September it would be a "long journey".
Shares in Morrisons fell up to 3.7 percent after it said sales at stores open more than a year, excluding fuel, fell 2.6 percent in the 13 weeks to Nov. 1, its fiscal third quarter.
That was below analysts' forecasts, ranging from down 1.8 to 2.5 percent, and followed a second quarter decline of 2.4 percent.
Morrisons' performance was below the most recently reported numbers from Tesco and Sainsbury, but ahead of Asda.
"Morrisons has not yet found a trading and retail proposition that will differentiate it in the marketplace," said Bernstein analyst Bruno Monteyne.
Like its rivals Morrisons is engaged in a price war to stem the loss of shoppers to discounters Aldi and Lidl and is also grappling with commodity-driven price deflation.
It said price deflation was -2.2 percent in the quarter, while reducing its reliance on voucher prmotions impacted like-for-like sales by 2.4 percent, creating a headwind of 4.6 percent.
"It's not quite cold turkey because we're still doing some vouchers," Potts told reporters. But the focus would be on cutting prices on key commodity lines, such as vegetables and meat, and keeping them low.
"Retailers have always considered reaching for vouchers when trade's a bit sticky because they tend to give you a shot in the arm," he said.
But "it's always been considered to be slightly more promiscuous trade than the underlying shopping trip improvements you can make around loyalty."
Finance chief Trevor Strain said underlying sales volumes, though still slightly negative, were improving quarter-by-quarter.
Potts said the turnaround plan was making progress, highlighting positive shopper reaction to more targeted promotions, improved store standards and moves to tailor stores to local communities.
Some retail commentators remain to be convinced.
"To claim you are making good progress on the back of these numbers is bordering on the delusional," said John Ibbotson of retail consultants, Retail Vision.
Morrisons reiterated its previous forecast that underlying pretax profit will be higher in the second half of its 2015-16 year than the 141 million pounds ($217 million) made in the first half.
Prior to Thursday's update analysts were on average forecasting 308 million pounds for 2015-16, versus 345 million made in 2014-15.
