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William Morrison Supermarkets PLC (MRW.LN) Thursday sealed its title as the best-performing U.K. supermarket chain over the holidays, with a better-than-expected increase in sales as it continued to gain market share, and said its full-year profit expectations remain unchanged.

Morrison, the U.K.'s fourth-biggest supermarket chain behind Tesco PLC (TSCO.LN), Asda Group Ltd. and J Sainsbury PLC (SBRY.LN), said sales at stores open at least a year, excluding fuel, rose 8.2% in the six weeks to Jan. 4 from a year earlier, above analysts forecasts for a rise of between 7% and 8%.

Morrison's 8.2% rise in third-quarter same-store-sales, excluding fuel, compares with Tesco PLC's (TSCO.LN) modest 2.5% rise for the seven weeks to Jan. 10 from a year earlier - its worst U.K. Christmas sales performance since the early 1990s.

Asda - a wholly-owned subsidiary of Wal-Mart Stores Inc. (WMT) of the U.S. - previously said its "solid" Christmas trading performance beat its own sales expectations, despite some industry predictions that this year would be the worst Christmas for retailers for more than 20 years. The group didn't release specific sales figures.

J Sainsbury PLC (SBRY.LN) booked a better-than-expected 4.5% rise in same-store-sales, excluding fuel, for the 13 weeks ended Jan. 3, underpinned by its best Christmas results to date.

Unlike Tesco and Asda, Morrison has limited exposure to the non-food market, which has been hit particularly hard as consumers cut spending on non-nonessential purchases. Sainsbury's non-food offering is also fairly small.

Trading reports since the start of January show the U.K. retailers which did best during Christmas were supermarkets, discount retailers, niche and online players - as well as businesses that cater to young, financially unencumbered consumers. All are bracing for a challenging 2009.

Christms 2008 updates show the economic downturn is hurting even those companies that cater to the wealthy.

On Tuesday, British fashion house Burberry Group PLC (BRBY.LN) said it may sack up to 540 staff in Spain and the U.K., about 9% of its total workforce, as part of its latest cost-cutting plans to help ride out the economic downturn.

Kesa Electricals PLC (KESA.LN) Tuesday reported a better-than-expected third-quarter sales performance, thanks largely to strong post-Christmas trading at its U.K. electronics chain Comet, but said it expected tough market conditions to continue and underscored how tough trading conditions are for sellers of expensive, discretionary items.

That message was echoed Monday when DSG International PLC (DSGI.LN) said John Allan of Deutsche Post AG (DPW.XE) will take over as chairman, as Europe's biggest electrical goods retailer tries to turn itself around after a poor performance in 2008.

DSG is one of the many U.K. retailers hurt by Christmas 2008. Another is Home Retail Group PLC (HOME.LN) which Thursday reported sales and margin declines and gave a gloomy outlook.

Automotive and leisure products retailer Halfords Group PLC (HFD.LN) also booked a decline in sales in its latest quarter but managed to improve margins despite steep discounting across the retail sector.

Encouraging Yule Tide reports have come from some, including catalogue and online home shopping retailer N Brown PLC (BWNG.LN), DVD, CD and video games chain HMV Group PLC (HMV.LN), baby and parenting-goods concern Mothercare PLC (MTC.LN) and from Associated British Foods PLC's (ABF.LN) discount clothing chain Primark.

Online retailing seems to have fared particularly well during the holidays though.

On Monday, ASOS PLC (ASC.LN) said its sales over the Christmas period more than doubled and the online fashion retailer also posted more than doubled sales for the 42 weeks ended Jan. 16.

The U.K. retail holiday trading season kicked-off on Jan. 5 when both U.K. department store chain John Lewis and London department store Liberty PLC (LBE.LN) presented encouraging sales reports.

On Jan. 6, Next PLC (NXT.LN), Debenhams PLC (DEB.LN), New Look and The Co-operative reported better-than-expected Christmas sales performances. Good holiday sales were also reported by department store House of Fraser and fashion retailer Peacocks.

Marks & Spencer Group PLC (MKS.LN) on Jan. 7 said it would close stores and cut jobs in reaction to falling sales and tightening margins over the key Christmas period.

Although Christmas 2008 was not the collapse many had feared it has seen a number of retailers go to the wall. They include U.K. sofa retailer Land of Leather PLC (LAN.LN), china and glass group Waterford Wedgwood PLC (WTFU.DB), Passion for Perfume Ltd., Adams Childrenswear Ltd., clothing chain USC, CD, DVD and video game retailer zavvi, coffee-and-tea purveyor Whittards of Chelsea, clothing chain the Officers Club, Woolworths Group PLC (WLW.LN) and furniture retailer MFI.

The question in the months to come is whether spending will dry up now that Christmas is over and the sales are coming to an end.

As well as deteriorating trading conditions, U.K. retailers - particularly those that buy goods in Asia - now face rising costs due to sterling's falling value versus the dollar. The bulk of the goods sold in Asia are pegged to the U.S. currency.

Other U.K. retailers scheduled to report trading performances in coming days include:

 
Mon, Jan. 26: WH Smith PLC (SMWH.LN) AGM trading update 
 
Tue, Feb. 3:  Carpetright PLC trading update 
 

-By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290; lilly.vitorovich@dowjones.com

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