UPDATE 1-Britain's Morrisons suffers sales fall in Christmas trading period

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LONDON, Jan 7 (Reuters) - Morrisons, Britain's fourth largest supermarket group, reported another fall in underlying sales over Christmas, blaming a tough economic backdrop and sustained consumer uncertainty.

Total group like-for-like sales, excluding fuel and VAT sales tax, fell 1.7% in the 22 weeks to Jan. 5 - a period that spans Morrisons third quarter to Nov. 3 and the nine-week Christmas trading period.

The outcome was better than feared however, with analysts forecasting a decline of 2.2%.

"It was encouraging that during an unusually challenging period for sales, our execution was strong and our profitability robust, demonstrating the broad-based progress we have made during the turnaround," Chief Executive David Potts said.

Despite the sales fall Morrisons said it expected to report profit for the full 2019-20 year within the current range of analysts' forecasts. It said it had managed costs well throughout the period, offsetting some of the impact on underlying sales.

Morrisons, based in Bradford, northern England, has a UK grocery market share of 10%, trailing market leader Tesco , Sainsbury's and Walmart's Asda in annual sales.

All of Britain's big four supermarket groups are continuing to lose market share to German-owned discounters Aldi and Lidl, which are continuing to open new stores aggressively.

On Monday Aldi UK reported a 7.9% increase in total sales in the four weeks to Dec. 24 and said its like-for-like sales were positive.

(Reporting by James Davey; editing by Kate Holton)