Sainsbury's
Sales of stores opened for more than a year dropped 0.4%Getty

Sainsbury's has upgraded its sales outlook after the grocer found that Christmas sales fell less than expected. The supermarket reported a 0.4% drop in like-for-like sales excluding fuel in the three months to 9 January, against a 0.7% fall forecast by analysts.

Chief executive Mike Coupe said he expects Sainsbury's sales in the second half of the new financial year will be better than in the first half. The company is competing in a highly deflationary market, as food prices continue to fall.

"We have traded well during the festive period in a highly competitive market," Coupe told shareholders. "Our stores delivered excellent levels of service and availability and we launched several new seasonal products and range improvements. As a result we have seen our market share grow in the quarter."

According to figures released by Kantar Worldpanel, Sainsbury's was the only supermarket among the Big Four chains to increase its share of consumer spending, which grew 0.8% year-on-year during the Christmas period. The FTSE 100-listed grocer also successfully brought its total share of the overall market back to 5.2%, Kantar added.

Sainsbury's rival Morrisons boasted an unexpected sales rise of 0.2%, against market expectations. Market leader Tesco is reporting Christmas results on Thursday (14 January).

However, unlike other retailers, like Next and M&S, Sainsbury's managed to generate sales growth in its general merchandise sector. The company stated that, despite the unseasonably warm weather, general merchandise sales jumped 5%, with clothing increasing 6%.

"It says much about the state of the Big Four that such modest performance should be regarded as a triumph," John Ibbotson, director of retail consultanccy Retail Vision commented. "Yet for Sainsbury's to be losing sales at a slower rate than many of its big rivals is still an achievement."

"While sales and profits are down on the same time last year, both volume and market share are up – showing that Sainsbury's is adapting better than most to the current environment," he added.

On 5 January, Argos owner Home Retail said it had rejected a takeover bid of £1bn (€1.37bn, $1.47bn) made by Sainsbury's. The offer was made in November 2015, but Home Retail, also owner of DIY store Home Base, said the supermarket's bid was not high enough.