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UK's Sainsbury's lags rivals as Christmas sales dip

Reuters  |  LONDON 

By James Davey

LONDON (Reuters) - reported a worse-than-expected fall in sales on Wednesday, confirming that Britain's second-largest supermarket group has fallen behind competitors as it battles to acquire smaller rival

The group said that while grocery sales were solid in its third quarter it suffered from poor demand for general merchandise.

like-for-like sales, excluding fuel, fell 1.1 percent in the 15 weeks to Jan. 5 - below analysts' average forecast of a 0.2 percent fall. Second quarter sales had risen 1.0 percent.

"Retail markets are highly competitive and very promotional and the consumer outlook continues to be uncertain," said

The group said its total fell 0.4 percent in the quarter. That reflected a 0.4 percent rise in grocery sales which was more than offset by a 2.3 percent fall in general merchandise sales.

It blamed the shortfall in general merchandise, which includes its business, on cautious customer spending and its decision to reduce promotional activity across Black Friday in November.

If meets analysts' consensus forecast when it reports third quarter and trading on Thursday, will be the weakest underlying performance of the big listed UK in the key festive period.

On Tuesday, No. 4 reported a 0.6 percent rise in for the nine weeks to Jan. 6 while industry data showed discounters and won market share from all of the big four chains in the quarter.

said shoppers had become more cautious amid uncertainty over Brexit.

Sainsbury's 7.3 billion pound deal to buy Asda, the UK arm of Walmart, could see the combined group leapfrog as Britain's biggest retailer.

It is currently being probed by the regulator - the (CMA), which has said it will publish provisional findings this month or early next month.

Shares in Sainsbury's are up 11 percent year-on-year but have fallen 15 percent over the last three months on concerns the deal may not proceed.

The stock closed on Tuesday at 266.5 pence, valuing the at 5.87 billion pounds ($7.48 billion).

Prior to Wednesday's update, analysts were on average forecasting a pretax profit for Sainsbury's 2018-19 year of 634 million pounds, up from 589 million in 2017-18.

($1 = 0.7848 pounds)

(Reporting by James Davey; Editing by Kate Holton and Mark Potter)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Wed, January 09 2019. 16:06 IST