SAINSBURY'S has warned it faces more challenges after reporting a 1.7 per cent drop in like-for-like sales over Christmas.
The firm says it will continue to cut food prices to ease losses.
However, Mike Coupe, chief executive, said its third quarter performance was an improvement, citing a record-breaking 29.5 million transactions in the week before Christmas.
He said: "We provided a great festive period for our customers, with food price deflation and falling fuel prices enabling customers to treat themselves.
"But the outlook for the remainder of the financial year is set to remain challenging, with food price deflation likely to continue."
Mr Coupe's warning comes as Sainsbury's announced its next round of reductions as part of a £150m investment in price-cutting.
He added: "Our performance showed an improving trend quarter-on-quarter.
"However, given the uncertainty in the trading environment, food price deflation and price reductions, we expect our fourth quarter like-for-like sales to be similar to that of our first half."
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