Sainsbury's elated about profits

London - British grocer Sainsbury's posted a better than expected performance in the Christmas quarter, though it was still hurt by a loss of share to discounters and an intensifying industry price war.

The group, which trails troubled market leader Tesco and Wal-Mart Stores' Asda by annual sales, said on Wednesday sales at stores open over a year fell 1.7%, excluding fuel, in the 14 weeks to 3 January, its fiscal third quarter.

That was better than analysts' forecasts of down 2.5-4.4% and represents an improvement from a second quarter decline of 2.8%.

Sainsbury's total third quarter sales fell 0.4%, excluding fuel.

The firm said the outlook for the remainder of the financial year is set to remain challenging, with food price deflation likely to continue.

"Given the uncertainty in the trading environment, food price deflation and the price reductions we announced this week, we currently expect our fourth quarter like-for-like to be similar to that of our first half," it said.