Supermarket chain Morrisons outlined the scale of its challenge at Safeway today after sales at the £3 billion acquisition remained in the doldrums.

Morrisons cut 7,500 prices at Safeway after taking over the chain but higher volumes have not been sufficient to compensate for the lower prices.

Sales in the 10 weeks from March 8 to May 16 were down 5.2%, worse than the 4% seen previously although with an improved trend in customer numbers.

Addressing shareholders at the company's annual meeting, executive chairman Sir Kenneth Morrison said much work remained to be done in integrating Safeway but added that he viewed the future with optimism.

He drew encouragement from the performance of the four Safeway stores - Ripon, Southport, Leeds and Chester - to have already been rebranded Morrisons.

Since conversion, their sales are more than 40% higher than their average in the 13 weeks preceding the overhaul, Morrisons added.

Around 50 of the larger Safeway stores are likely to be given the Morrisons brand by the end of this year - part of a three-year process to overhaul the former company's 427-strong estate.

At the same time Morrisons has launched a television advertising drive to promote its new range of prices at Safeway stores.