UPDATE 1-Sainsbury's sales fall as King era draws to a close

Wed Jun 11, 2014 2:32am EDT

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LONDON, June 11 (Reuters) - Britain's J Sainsbury posted a second straight fall in quarterly underlying sales, bringing a disappointing note to Chief Executive Justin King's preparations to step down after 10 years at the helm.

The group, which trails market leader Tesco and is battling with Wal-Mart Stores' Asda to be the UK's No. 2 supermarket, said sales at stores open over a year fell 1.1 percent, excluding fuel, in the 12 weeks to June 7, its fiscal first quarter.

That compared to analysts' forecasts of down 0.5-1.5 percent and a fall of 3.1 percent in the fourth quarter of Sainsbury's 2013-14 year.

The fourth quarter decline followed unbroken positive sales for the best part of nine years. King will be succeeded by commercial director Mike Coupe following Sainsbury's annual shareholders' meeting on July 9.

The firm said it was confident it would outperform its supermarket peers through the remainder of the year.

The grocer last month forecast underlying sales growth for the year similar to the 0.2 percent achieved in 2013-14.

That is significantly better than expectations for Tesco and Morrisons who have both flagged negative like-for-like sales as they cut prices.

Britain's grocery market is growing at its slowest rate for 11 years and its so called "big four" players are all being outpaced by sales growth at discounters Aldi and Lidl, while upmarket chains Waitrose and Marks & Spencer are also gaining share.

Last week Tesco reported its worst quarterly performance for 40 years.

Consumers are shopping around to save money and are wasting less, shying away from big weekly shops to buy little and often in local convenience stores and buying more online.

To counter the discounters Tesco, Asda and Morrisons have all pledged to cut prices - moves King has called a "skirmish".

But Sainsbury's has vowed to remain competitive on price, raising analysts' concerns about a possible price war hitting earnings across the industry.

The grocer reckons it can set itself apart from rivals with a strategy that focuses on own-brand products, on the quality, provenance and ethical credentials of its food and on investment in convenience and online, the two fastest growing channels.

Currently, monthly industry data published last week showed Asda as the best current performer of the "big four", with Sainsbury's market share slipping 0.2 percent to 16.5 percent year-on-year.

Shares in Sainsbury's, down 9.6 percent so far this year, closed Tuesday at 329.8 pence, valuing the business at 6.3 billion pounds.

The group's total first quarter sales rose 1.0 percent, excluding fuel. (Reporting by James Davey; editing by Kate Holton)

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