By Jonathan Davies

Sainsbury's has warned against a "challenging" remainder of the financial year after it reported a drop in sales over the Christmas period.

The supermarket chain reported a 1.7% fall in like-for-like sales, excluding fuel, in the 14 weeks to 3 January.

Total sales over the period were down 0.4%. Like-for-like sales including fuel fell by 2.8%. Although analysts expected sales to decrease by as much as 3%.

Despite the fall in sales over the period, Sainsbury's said it had a record Christmas week, with more than 29.5 million transactions.

Sainsbury's chief executive Mike Coupe said he expects fourth quarter sales to be similar to its first half performance as a result of "the uncertainty in the trading environment, food price deflation and price reductions".

Mr Coupe did note the growing performance of Sainsbury's convenience stores - sales were up 16% over the Christmas period. Christmas Eve marked its convenience stores' biggest ever day with sales hitting £8m.

The figures come a day after Sainsbury's announced plans to cut the prices of 1,000 of its most popular products in the latest move of the supermarket price war.

Phil Dorrell, director of the retail consultancy Retail Remedy, said: "Sainsbury's is under attack from all angles – from the discounters who are going from strength to strength, food price deflation, a wounded Tesco and a Morrisons that may finally be starting to halt its own sales freefall.

“Like-for-like sales slump aside, there is a lot Sainsbury's does right. It has smaller stores than its competitors, a strong convenience business, a solid online proposition and some of the best own-label stats in the business. Taste the Difference is really starting to make a difference."

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