Seymour Pierce has downgraded its rating for supermarket group WM Morrison from 'hold' to 'reduce' and cut its target price for the shares from 300p to 250p ahead of the firm's third-quarter results next week.

Analyst Kate Calvert said: "Recent market share data points to continued deterioration in sales trends and so a weak number is expected by the market next week". Morrison will be reporting on November 8th.

Seymour Pierce expects third-quarter (13 weeks to end of October) like-for-like (LFL) sales excluding petrol to be down 2%, compared with a lesser second-quarter LFL decline of 0.9%.

"The news that Morrison is accepting other retailers vouchers and aggressively couponing (£5 off £40 spend) also suggests trading remains under pressure," Calvert said. Meanwhile, she said that sales are unlikely to have been helped from the launch of Morrison's 'Fuel Saver' promotion on September 13th.

Calvert said: "Consequently pressure remains on forecasts and we expect further downgrades with this update. The recent share price underperformance has started to discount this to an extent and there is some support from the 4.4% dividend yield and on-going share buyback programme.

"However, we expect the shares to drift further given management may well have to invest margin to protect market share as we believe Christmas will be extremely aggressive, as Tesco can not afford to continue underperforming either and consumer spending is expected to remain subdued."

Shares were down 0.34% at 267p in mid-morning trade.

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