LONDON, Jan 8 (Reuters) - British grocer J Sainsbury eked out a tiny rise in underlying sales in itsChristmas quarter, with its rate of growth slowing significantlyin a tough overall market.
The group, which trails market leader Tesco and isbattling with Wal-Mart Stores' Asda to be the UK's No. 2grocer, said on Wednesday sales at stores open over a year rose0.2 percent, excluding fuel, in the 14 weeks to Jan. 4, itsfiscal third quarter.
Though that was ahead of analysts' forecasts which rangedfrom flat to down 1 percent and represented a 36th consecutivequarter of underlying sales growth, it was a slowdown fromsecond quarter growth of 2.0 percent.
Sainsbury's total third quarter sales rose 2.7 percent,excluding fuel, and the firm heralded its "best Christmas ever".
Britain's major grocers are finding the going tough, despitetheir focus on essential goods, as consumers' disposable incomesremain under pressure from wage rises not keeping up withinflation.
Analysts reckon all of the UK's so called "big four" grocerslost market share and saw like-for-like sales volumes decline inthe run-up to Christmas, reflecting a subdued overall market andincreased promotional activity.
They are also being by squeezed between hard discountersAldi and Lidl and upmarket grocersWaitrose and Marks & Spencer.
Sainsbury's Chief Executive Justin King said the quarter wascharacterised by a "very tough sales environment" throughoutOctober and November, but with record numbers of customers andstrong sales in the key period over Christmas.
"As with last year, we expect customers to spend cautiouslyin the few months following Christmas, in an attempt torebalance the household finances," he said.
Aldi and Lidl both said on Tuesday they enjoyed recordtrading at Christmas. Tesco updates on Thursday and is forecastto report a fall in UK sales at stores open over a year,excluding fuel and VAT sales tax, of 0.5-2.5 percent for the sixweeks to Jan. 4.
Asda said on Monday it saw a good performance at Christmasboth in store and online but will not release figures until Feb.20. No. 4 player Morrisons will update on Jan. 20.
The Co-operative group said on Wednesday that its total foodsales over the 13 weeks to Jan. 4 were flat.
Sainsbury's strategy is focused on own-brand products andinvesting in online and local convenience store channels.
In its third quarter online grocery sales rose over 10percent, while convenience sales were up nearly 18 percent.
Shares in Sainsbury's, up 11.2 percent over the last year,closed Tuesday at 368.9 pence, valuing the firm at 7.02 billionpounds ($11.5billion)