J Sainsbury Plc (SBRY), the U.K.’s third-largest supermarket chain, lowered its full-year sales outlook amid what it expects to be a tough end to the financial year as consumers tighten their belts after Christmas.

The fourth quarter will be similar to the third, when like-for-like sales barely grew, Chief Financial OfficerJohn Rogers said today on a conference call. Full-year same-store sales will rise “just below” 1 percent, Rogers said, less than Sainsbury’s prior guidance for 1 percent to 1.5 percent growth.

Sainsbury fell as much as 2.7 percent in London trading, reversing initial gains after the grocer reported third-quarter sales that beat estimates. Growth was slower than that announced today by the upscale Waitrose chain, which along with German discounters Aldi and Lidl is gaining market share at the expense of Britain’s four biggest supermarket chains.

“Sainsbury, along with its other big four superstore competitors, is likely to be losing market share and suffering negative volumes, unchartered territory for the industry, as hard discounters, premium retailers and specialists win,” Clive Black, an analyst at Shore Capital, said in a note.

Sainsbury was down 2 percent at 361.5 pence at 10:07 a.m. in London, after initially gaining as much as 3.9 percent.

The fourth quarter is always difficult and will be “very competitive” as customers cut back post-Christmas, Rogers said.

‘Tough Place’

The CFO said he’s “comfortable” with Sainsbury’s previous guidance that profit margins in the second half will show similar improvement to the first six months of the year.

Analysts at Citigroup Inc. dismissed the negative market reaction, saying the sales and guidance were as good as can be expected. “The whole U.K. listed grocery sector looks in a tough place,” analyst Pradeep Pratti said in a note.

Third-quarter revenue at stores open at least a year rose 0.2 percent, excluding gasoline, Sainsbury said today. That was the 36th consecutive quarterly increase and exceeded the median estimate of 13 analysts for a 0.4 percent decline.

Still, growth was the weakest in nine years, Andrew Gwynn, an analyst at Exane BNP Paribas, said by e-mail.

All Britain’s main grocers are losing market share as customers turn to Aldi and Lidl and the upscale Waitrose chain, which today reported record Christmas takings. More shoppers are turning to discounters to make their money go further as rising utility bills leaves them with less disposable income.

Lidl yesterday reported its “best performance to date” over the Christmas period with “huge” increases in sales of premium own-label Deluxe products.

Waitrose Growth

At the other end of the spectrum, Waitrose said today same-store sales rose 3.1 percent in the five weeks ended Dec. 24.

The quarter was characterized by “a very tough sales environment throughout October and November, with customers saving up in order to treat their families over the Christmas period,” Sainsbury Chief Executive Officer Justin King said in a statement today.

The week leading up to the holiday was the grocer’s busiest ever, with 28 million transactions, King said.

The own-brand Taste the Difference range was among the best performing lines, with sales growing more than 10 percent.

Convenience stores were also an area of strength, boosting sales almost 18 percent, while online grocery revenue increased more than 10 percent, Sainsbury said.

Tesco Plc, (TSCO) Britain’s largest retailer, will announce a 2 percent drop in holiday same-store sales when it reports tomorrow, according to HSBC estimates. Revenue at William Morrison Supermarkets Plc (MRW) may have declined 3.9 percent over the holiday period, according to Bank of America Corp. estimates.

Weak grocery sales ahead of Christmas led to “above-normal levels of promotional activity,” as retailers fought for business, bringing food inflation down to its lowest in almost four years, the BRC-Nielsen Shop Price Index showed today.

(Source: Bloomberg)