UPDATE 2-Morrisons says must do better as Xmas sales slump
* 6 weeks to Dec. 30 underlying sales down 2.5 pct
* Firm says disappointed by Christmas outcome
* Blames promotions, brand differentiation, mulling online
* Sees FY outcome in line with expectations
* Shares up 0.2 pct
By James Davey
LONDON, Jan 7 (Reuters) - Britain's struggling supermarket chain Wm Morrison said a sales fall worsened over Christmas as bland promotions failed to lure customers also put off by its lack of an online presence and convenience stores.
The UK's fourth-biggest grocer behind market leader Tesco , Wal-Mart's Asda and J Sainsbury said on Monday sales at stores open over a year fell 2.5 percent in the six weeks to Dec. 30, picking up speed from a third quarter drop of 2.1 percent.
Many of Britain's grocers are finding the going tough, despite their focus on essential goods, as consumers fret over job security and a squeeze on incomes.
But the convenience store market is growing at about 6 percent a year, while the online food market is growing at about 20 percent - channels long exploited by Morrisons' rivals. Te sco and Sainsburys are expected to show some sales growth in contrast to Morrisons, which has only a f e w convenience stores and no website for home delivery of food.
Analysts, who tipped Morrisons to be the weakest Christmas performer of Britain's so called "big four" supermarkets, forecast like-for-like sales to fall between 2 and 3 percent.
As a result of the company's well-flagged structural disadvantages, many traders bet against it ahead of its trading update. Demand to borrow Morrisons stock to sell short over the last month rose 40 percent, according to data firm Markit.
Morrisons Chief Executive Dalton Philips said that with consumer confidence "fragile" he expected difficult market conditions to continue through 2013.
However he said the 482-store group would focus on doing a better job of telling customers how its products and service beat those of other supermarkets, in particular by pointing out its more than 5,000 trained butchers, bakers and fishmongers.
"We have real craft skills in our stores ... and we need to shout about it," said Philips. "I think you'll see a lot more as we go into Q1 of 2013."
Philips has yet to decide whether Morrisons will launch an online food offer but is researching the possibility and will say more when the firm publishes full year results in March.
"We're not too late to the party, it's still only 5 percent of the market. So in terms of the long term we haven't lost out," he said.
"This is a market where for 12 years people haven't made money and we want to do the right thing both for our shareholders and our customers."
Morrisons also failed to make its promotions stand out amid a sea of supermarket discount vouchers at Christmas, and Philips said the company would also look at ways to differentiate itself in this area.
"We have got to do things differently with our promotional programme," he said.
Despite the sales decline Morrisons said its full year performance will be broadly in line with expectations. Analysts' consensus for 2012-13 underlying pretax profit before Monday's update was 913 million pounds, down from 935 million pounds in 2011-12.
Morrisons shares, down 20 percent over the last year, were up 0.2 percent at 257 pence at 1110 GMT, valuing the business at about 6.04 billion pounds ($9.69 billion)
"We still feel that a concrete explanation from management regarding the drivers of Morrison's trading deterioration is lacking, making it difficult for us to think more constructively about the shares," said Citi analyst Al Johnston.
Morrisons confirmed on Monday that company secretary Greg McMahon had left the firm to take up a new role at Mitchells & Butlers. He is the sixth major manager to leave the company in a year.
Morrisons has recruited Casper Meijer as group trading director from Dutch retail group Ahold, though he will not start until June, and promoted Nick Collard to group marketing and customer director from marketing and operations director.
The extent of Morrisons' pain will become clearer as the week goes on: Sainsbury's reports third-quarter sales on Wednesday, while Tesco publishes Christmas figures on Thursday.
For a FACTBOX: How UK retailers fared at Christmas, please click on:
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