Questor share tip: Morrisons downgraded on falling sales The group was slow to open the local convenience store formats and is only now building up its online capability. This has left it exposed as sales in the core superstores have suffered from customers with falling real incomes and increased competition from discounters such as Aldi and Lidl. Analysts at Shore Capital pointed out that Morrisons needs to return to like-for-like growth in the fourth quarter to hit full-year targets, adding: "The heat is certainly on for management to deliver a material improvement in across-the-board sales growth over the important Christmas period." Morrisons" management stressed that full-year targets remain unchanged in its most recent trading update. Questor gave the company the benefit of the doubt as plans were announced for an ambitious M-local store opening programme next year and the tie-up with online supermarket distribution group Ocado made sense. But, since we recommended buying the shares (293p, August 24) they have only disappointed. While taking a loss is always painful, the concern now is that there could be worse to come. The shares are trading on 11 times forecast earnings, falling to 10 times next year, and following the recent weakness they now offer a forecast dividend yield of 4.9pc. The dividend is covered almost twice by earnings and, as such, looks relatively attractive. The shares have traded in a fairly tight range this year, between 260p to 300p, but the dividend might not be enough to protect Morrisons from a further sell-off. We downgrade to a hold.