Sainsbury's beats expectations despite Christmas sales falling 0.4%

Sainsbury's sales were down 0.4 per cent in the three months to January 9 compared to the same period a year earlier

Sainsbury's has upgraded its profit forecast (Reuters)

Sainsbury's sales were down 0.4 per cent in the three months to January 9 compared to the same period a year earlier.

But this was still better than analysts had expected in what the grocer described as “a highly competitive market”.

Sainsbury's described the performance as "good" and raised hopes that its like-for-like sales in the second-half would be better than the first.

It also praised the success of its Christmas ad campaign, based around beloved children's book character Mog the cat, which it said had been viewed nearly 37 million times online.

However, it remained cautious saying “food deflation and pressures on pricing will ensure that the market remains challenging for the foreseeable future”.

At the start of the year, Sainsbury's revealed it had made a bid to buy out for Argos that its owner Home Retail Group had rejected.

Like rivals including Tesco, Asda and Morrisons, Sainsbury's has been dealing with the growing threat of discounters like Aldi and Lidl that has helped bring on a ferocious industry price war.

Data from Kantar Worldpanel released on Tuesday outlined the scale of the challenge, with Aldi and Lidl achieving double-digit growth in the 12 weeks to January 3.

Sainsbury's said it reduced promotions over Christmas and cut multi-buys in favour of lower prices.

Boss Mike Coupe added: “We will continue to remain competitive on price and our performance this quarter provides further evidence that our strategy is working.”

Sales of general merchandise were up 5 per cent and clothing up 6 per cent as it proved resilient to the effects of mild winter that hurt the likes of Next and Marks & Spencer