Sainbury's Christmas sales better than expected - but outlook remains 'challenging'

The supermarket said sales at stores open for more than a year fell 1.7 per cent

Pressure from discounters and an industry price war are still taking their toll on the business (Getty)

Sainsbury’s has reported better than feared sales for the Christmas quarter, though the figures show that the pressure from discounters and an industry price war are still taking their toll on the supermarket.

Sainsbury’s, the UK’s third largest supermarket in terms of annual sales, said sales at stores open for more than a year fell 1.7 per cent, excluding fuel, in its third quarter.

That topped analysts’ forecasts of a decline of 2.5-4.4 per cent and represents an improvement from a second quarter decline of 2.8 per cent.

The grocer's total third quarter sales fell 0.4 per cent, excluding fuel.

Market-leader Tesco is set to report trading figures on Thursday and is also expected to post a decline.

Sainsbury’s said the outlook for the remainder of the financial year is set to remain challenging, with food price deflation likely to continue.

"Given the uncertainty in the trading environment, food price deflation and the price reductions we announced this week, we currently expect our fourth quarter like-for-like to be similar to that of our first half,"it said.

Additional reporting by Reuters