Trade warning knocks Sainsbury's

Sainsbury's has seen a rise in sales of its own brand products

Shares in Sainsbury's have declined more than 16% despite the supermarket group reporting quarterly sales that beat analyst expectations.

Excluding petrol, Sainsbury's said its like-for-like sales - which pull out new store openings - rose 4.3% in the three months to 4 October.

The share fall came after Sainsbury's chief executive Justin King said trading was "particularly challenging".

The firm added that retail sales were now "significantly constrained".

Sales increases

Sainsbury's said many of its customers had switched to its own brand products to save money during in the past few months - and its own brand sales were up significantly as a result.

Mr King added that he did not expect any quick improvement in the economy: "The economic environment remains particularly challenging and we expect this to continue throughout the second half, but we have developed the Sainsbury's offer to perform in these conditions."

He described the company as a "robust business" that was "well positioned... [for] the important Christmas trading period".

Supermarkets so far have ridden out the credit crisis relatively successfully - with both Tesco and Morrison reporting recent increases in their sales.

"We think that this is as good as it gets [for Sainsbury's sales] and see margin pressure evolving over the next 12 months," said Panmure Gordon stockbrokers.

In afternoon trading, Sainsbury's shares were down 16% or 50.75 pence to 264p.