Sainsbury’s, the UK’s second-largest supermarket, has warned that market conditions in UK retail remain challenging. UK price inflation is currently running at 3.1%. Sainsbury’s said it is “cautious” about the consumer environment for 2018, but added that it still expected underlying profits for its 2017 financial year to be moderately above its previous guidance of £559m (€631m).

The UK retailer this week announced like-for-like grocery sales of 2.3% for the third quarter period to 6 January. This sales growth is slightly behind the rate of food inflation in the UK at 2.5%. Sainsbury’s said online grocery sales grew by more than 8% in the period, while sales from convenience stores were up 7%.

Sainsbury’s delivered third-quarter sales growth of 1.2% in its overall business. The overall business was dragged by a 1.4% decline in general merchandise sales. In contrast, German discounter Lidl said it grew sales in its UK business by 16% over the important Christmas period, with a record customer footfall in December.