Morrisons preliminary results show underlying profits before tax down 4% to £901m with like-for-like sales (excluding fuel and VAT) down 2.1%.
It marks the first fall in full-year profits for six years.
The deal by Morrisons to buy 49 Blockbuster stores and rebrand them as Morrisons M local convenience stores will not prevent any of the job cuts already announced by the DVD chain's administrators Deloitte even though the supermarket plans to reopen them by the summer.
The stores which have been bought are among 164 earmarked for closure by Deloitte last week, threatening around 800 jobs and following 168 shop closures and 760 job cuts that had already been announced.
Blockbuster, which had 528 stores and employed 4190 staff, collapsed into administration last month after struggling to adapt to the changing market and rivalry from internet retailers including Netflix, Amazon's LoveFilm and iTunes which now offers a movie rental service.
The head of Morrisons' convenience store operation says the Bradford-based chain is hoping to take advantage of a growing demand for smaller high-street supermarkets. Gordon Mowat's comments follow the announcement that the chain has bought 49 former Blockbuster stores which will be rebranded.
We are rolling out the Morrisons M local estate at pace this year and these acquisitions give us a kickstart in securing a solid foothold in this key sector. The convenience market is growing as more people shop locally and we want to be in a position to take advantage of this.
Morrisons hopes to have at least 70 convenience stores by the end of 2013 and is also expected to announce moves towards a full-scale online food delivery service alongside its annual results in March.
The chain reported a 2.5% decline in like-for-like sales in the last six weeks of 2012, following a 2.1% decline the previous quarter.
Bradford-based supermarket Morrisons has bought 49 stores from the failed DVD and games rental chain Blockbuster to expand its convenience store business. The shops will be rebranded as Morrisons M local and could be open by the end of the year.
Morrisons says it hopes to create around 1000 jobs when it reopens the new shops which will be mainly in London and the South East. The announcement follows the supermarket's recent acquisition of seven former Jessops stores.
The Bradford-based supermarket chain Morrisons says its Christmas profits were lower than expected. Trading fell by 2.5% compared with the same period last year.
Sales at Bradford-based supermarket Morrisons sales fell 1.1% over the last three months - leaving it trailing its High Street rivals such as Leeds-based Asda which saw sales increase by 2.7% over the same period.
Morrisons is now hoping to boost their coffers with Christmas sales by emphasising value for money.
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Tickets go on sale today for Leeds' latest festival, hosted by Bradford-based supermarket chain Morrisons. Set for July the event, combines entertainment from bands and singers, such as The Human League and Matt Cardle, as well as celebrity chefs.