Supermarket giant Sainsbury's has reported its "best Christmas ever" in a robust trading performance against a gloomy retail market.

In its Q3 trading statement, which also contains information on Christmas trading, Sainsbury's shows an increase of 1.5 million customer transactions on the previous year's festive period.

Total sales for Q3 were up 4.5 percent, excluding fuel.

"This was a strong quarter, rounded off by our best Christmas ever, despite the economic backdrop," said Justin King, Sainsbury's chief executive.

King noted that despite the positive results towards the end of 2011, retail remains a challenging market in 2012.

"Consistent with trends over the past year, we expect customers to spend cautiously in 2012, particularly in the first few months as they tighten their belts post-Christmas," said King.

"Although the short term remains challenging, key events later in the year, such as the Queen's Diamond Jubilee and London 2012 Olympic and Paralympic Games, provide opportunities for growth."

Sainsbury's opened its 1,000th store in Q3.

Retailers Face Bleak 2012

Recent research by business advisory group Deloitte shows just how tough 2011 has been for the retail market.

2,010 firms went into administration last year amid fierce price battles and discounting in a desperate attempt to lure customers in to shops.

"Many retailers would have been banking on the busy Christmas period to give them a much needed sales uplift but retailers were forced into discounting at levels last seen in the aftermath of the collapse of Lehman Brothers, putting severe pressure on margins," said Lee Manning, Deloitte's restructuring services partner.

"We will see a growing number of companies enter administration, as fears around the eurozone crisis and rising unemployment increase."