Morrisons revealed a deeper slump in sales today as the effects of a price war in the supermarket sector continued to bite.
The Bradford-based chain said like-for-like sales - trading in stores open for longer than a year - dived by 7.1% in the 13 weeks to May 4. This was much weaker than the 4.5% drop forecast in the City and meant overall sales were down by 4.2% in the first quarter of its financial year.
Last week, Morrisons launched an "I'm Cheaper" campaign which cut prices across 1,200 products by an average of 17%.
The move came after Britain's fourth biggest supermarket stumbled to a £176 million annual loss in March and issued a profits warning, sending shares down 12%.
Neil Saunders, managing director of retail consultancy Conlumino, described the latest figures from Morrisons as woeful, particularly as they followed a 1.8% decline in the same period a year earlier.
He said: "The issue for Morrisons is that if its price cuts do not deliver increased volume, they will simply have a negative impact on profitability and will weaken the chain still further. Sadly, we believe this is a distinct possibility."
The firm is planning to invest £1 billion over the next three years to improve its competitiveness and will also launch a new loyalty card scheme. Morrisons chief executive Dalton Philips said today: "The plans we set out at our results in March are on track.
The reaction of our customers to the 1,200 'I'm Cheaper' price cuts we announced last week has been very positive.
The business maintained its underlying full-year profit before tax range of between £325 million and £375 million.
"Although it will take time for their full impact to be felt, we are confident that these meaningful and permanent reductions in our prices will enable our clear points of difference to resonate strongly with consumers."
The big four supermarkets - Tesco, Asda, Sainsbury's and Morrisons - have seen their sales squeezed in recent years between discount retailers such as Aldi and Lidl and upmarket rival Waitrose.
Morrisons added that its fledgling online sales business had done well in Warwickshire and Yorkshire and would begin deliveries in London next Monday.
The supermarket said that by the year-end its online business will reach up to 50% of UK households and, together with its smaller convenience stores, is expected to account for more than £500 million of sales per year.