Morrisons, the third-largest grocer in Scotland after Tesco and Asda, suffered a 2.5% fall in like-for-like sales in the six weeks to December 30. This was after a 2.1% year-on-year decline in its third quarter.
Analysts said the Christmas decline was the equivalent to a 4.5% fall in the volume of sales.
Total sales, which includes new stores, were down 0.9% and Morrisons is expected to have posted the worst festive figures of all the large supermarket chains.
Morrisons has long warned that internet grocery shopping is unprofitable.
It has focused on in-store features such as its bakeries and butchers and restricted its online activities to the purchase of childrenswear business Kiddicare in 2011 and a wine delivery business.
But Mr Philips, who joined from Canadian retailer Loblaw in 2010, admitted Morrisons had been hit by the "accelerating importance" of home shopping delivery at a time of high petrol prices.
He hinted strongly that Morrisons is poised to launch its own online grocery business.
He said: "We are not too late to the party.
"We have not lost out in the long term. There are some last-mover advantages."
The wider grocery sector is under pressure as shoppers see their disposable income squeezed between muted wage growth and rising costs.
One result is that shoppers have been purchasing less on their weekly supermarket outing, but topping up at convenience stores to minimise waste.
Morrisons has missed out on these additional purchases because it only opened its first convenience store in 2011 and still only has 12.
Mr Philips said the company will have a 70-strong estate by the end of next year.
Morrisons, which has 57 stores in Scotland, said that it had found one-third of customers did their Christmas shopping with a list in order to control spending.
Mr Philips said: "People were making choices about what they put in their baskets.
"They might have bought three bottles of champagne last year but only two this year."
The Bradford-based chain also faced intense use of promotional vouchers.
Mr Philips said there had been some difference in trading between the stronger south of the UK and the rest of the country.
The former Wal-Mart executive expects little assistance from the economic backdrop.
He said: "Looking ahead we expect market conditions to remain difficult throughout 2013."
He highlighted the need for Morrisons , which employs around 130,000 staff at 455 stores in the UK, to attract floating shoppers who are not loyal to any one chain.
The chain recently signed an advertising deal with entertainers Ant and Dec.
Mr Philips insisted that his strategy, which seeks to attract more well-heeled shoppers to smartened-up stores is well received and brushed off talk that he might be forced out of the business.
But some analysts have warned that Morrisons is alienating its traditional working-class customers.
Clive Black, analyst at Shore Capital, said: "We believe that the business has lost touch with some of its core customers, but not attracted new ones."
Carolien Gulliver, analyst at Espirot Santo said: "Morrisons has been losing share to Tesco and Sainsbury in the vouchering battle, and has also faced strong competition from Asda, Aldi and the discounters."
Morrisons' shares fell 0.8p or 0.3% to 256.1p.
Tesco and J Sainsbury are both expected to have seen positive like-for-like sales growth when they publish their festive figures this week.