Sainsbury sales tops forecast

By Mark Potter

LONDON (Reuters) - J. Sainsbury, the third-biggest grocer, posted third-quarter underlying sales at the top end of forecasts, helped by strong demand for own-brand ranges as cash-strapped shoppers looked to save money.

Shares in the 140-year-old firm, which had risen almost a fifth in value in the past month, were unchanged as it guided analysts away from raising profit forecasts because of the investment it was making in lower prices and promotions.

Retailers are mostly struggling with falling sales as shoppers cut spending amid rising unemployment, sliding house prices and fears of a deep recession, but supermarkets are still growing thanks to their focus on essential items.

The Bank of England is expected to cut interest rates at midday on Thursday to their lowest level since the bank was founded in 1694, in a bid to limit the downturn.

Sainsbury, which runs over 500 supermarkets and about 275 convenience stores, said sales at shops open at least a year, excluding fuel, rose 4.5 percent in the 13 weeks to January 3.

Forecasts ranged from up 2.5 to 4.5 percent, with an average of 3.8 percent, according to a company poll of 13 analysts.

The firm said it had its best ever Christmas, with over 18 million customers a week during the quarter and 22.6 million in the seven days before Christmas, including its busiest ever trading day on December 23.

Demand was led by a sales surge for its budget "basics" range, up more than 40 percent year-on-year.