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* Seeing sustained and continuing margin pressure
* Analysts trim full-year earnings forecasts
* Q3 retail sales up 13.6 pct
* Still expects to sign multiple licensing deals
* Shares fall as much as 14.6 pct (Adds detail, CFO, analyst comment, shares)
By James Davey
LONDON, Sept 13 (Reuters) - A prolonged fall in groceryprices is pressuring profit margins at British onlinesupermarket Ocado and cut-throat competition shows nosign of letting up, it said on Tuesday, triggering a slide inits shares.
Ocado stock, which has had a rollercoaster ride since itsmarket debut in 2010, had risen 11 percent over the last monthafter the firm sealed a new distribution deal with Morrisons, Britain's No. 4 supermarket.
Those gains were wiped out on Tuesday, however, as analyststrimmed their earnings forecasts.
The stock was down 14.6 percent at 275 pence by 0846 GMT,valuing the business at 1.72 billion pounds ($2.3 billion).
"As the market remains very competitive, we are seeingsustained and continuing margin pressure and there is nothing tosuggest that this will change in the short term," said ChiefExecutive Tim Steiner.
Finance chief Duncan Tatton-Brown explained Ocado's policywas to follow the major players in the grocery market, includingmarket leader Tesco, on price.
"Therefore when market prices are down our prices are down,"he said.
But he still expected Ocado's sales to grow ahead of theonline grocery market, and substantially ahead of the marketoverall.
Prior to Tuesday's update, analysts were on averageforecasting full-year core earnings of about 88 million pounds($117 million), up from 81.5 million pounds in 2015.
Analysts at Numis, who have a 'buy' rating on the stock, cuttheir forecast to 85.1 million pounds from 87.5 million -"recognising that the industry-wide pricing pressure on basketsize is likely to weigh on gross margin."
Ocado, whose range includes products supplied by upmarketsupermarket Waitrose, said gross retail sales rose 13.6percent to 286.4 million pounds in the 12 weeks to Aug. 7, itsfiscal third quarter. That compared with first-half growth of13.9 percent.
Gross sales, which include the fees Ocado earns fromMorrisons, increased 15.4 percent to 314 million pounds.
Tatton-Brown highlighted a 19 percent increase in averageorders per week to 226,000 in the period, Ocado's bestperformance in over five years, as evidence the launch of AmazonFresh in June had not hurt its business.
Analysts see winning international agreements with retailersin north America and western Europe as the key influence on Ocado's stock market valuation. However, the company missed itstarget of securing a deal by the end of 2015 and is still toannounce one.
"There's no change to our view on that," said Tatton-Brown."We're still confident that we'll sign multiple deals in themedium term."
($1 = 0.7508 pounds) (Editing by Kate Holton and Mark Potter)
