Slowdown in Sainsbury's sales growth

British retailer Sainsbury's revealed lower-than-expected sales growth today as the supermarket chain joined Tesco in warning of a "competitive" trading environment.

The company saw like-for-like sales excluding fuel rise 5.1% in the 12 weeks to June 16, below some analyst predictions of around 5.5%.

The performance comes a day after its larger rival Tesco disappointed the City with like-for-like sales growth of 4.7%.

Sainsbury's said the recent round of price-cutting by rivals Tesco, Asda and Morrisons reflected the competitive nature of the market, but added that it had moved to cut prices on 4,500 products since April.

Sainsbury's, the UK's third largest supermarket chain, reported its 10th successive quarter of growth, although the figures compares with growth of 5.9% in the previous quarter, and 5.7% in the same period last year.

But chief executive Justin King said the company was up against tough comparatives after last year's sales figures were bolstered by the World Cup and warmer weather.

He added that the company's sales performance was helped by its ability to control stock levels during warm weather in April followed by a wet May, due to supply chain improvements.

Sainsbury's quality food sales drove growth, with increases in growth of Fairtrade and organic goods as customers sought out more ethical products. By August, the company expects that all bananas sold in its stores will be Fairtrade.

The company is in the final year of a three-year recovery plan begun by Mr King in 2004.

In May, the retailing giant reported underlying profits up 42% to £380m (€564m), and set out plans to grow sales at the business by £3.5bn (€5.19bn) within three years. A £10.1bn (€15bn) bid from a private equity consortium for the company collapsed in April after opposition from the Sainsbury family.