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Sainsbury's ends 9-year run of growth as sales decline in 2013

U.K. supermarket chain Sainsbury's reported a drop in sales in the final quarter of 2013, ending the group's nine straight years of sales growth, and warned the outlook for customers will continue to remain challenging in the year ahead.

The group said like for like sales were down 3.8 percent in the fourth quarter. Excluding fuel, like-for-like sales fell 3.1 percent. It nevertheless hoped to outperform its peers this year.

(Read more: UK supermarkets caught in dangerous middle ground)

"Clearly it is disappointing, breaking a nine year run of positive sales," Chief Financial Officer John Rogers told CNBC. "We are quite proud that we maintained our market share. But there is no question that the market out there is very tough," he said.

Rogers put the increasingly difficult trading environment down to customers shopping less frequently and wasting less, adding that even in the case of an economic upturn customers are not likely to start wasting more again.

Ben Stansall | AFP | Getty Images

Sainsbury's dip in profits follows that of rival Morrisons, which posted it lowest profit in five years and slashed expectations going forward last week, sending shares in the sector sharply lower.

Competition is tough amongst the U.K.'s "big four" supermarket chain, made up of Tesco, Morrisons, Sainsbury's and Asda, and analysts have warned of a lack of direction in the middle-ground between budget and high-end retailers.

In decades gone by, Tesco and its peers rose to prominence with only themselves as competition. This landscape has radically changed, however, with new entrants at both the higher- and lower-end.

Waitrose, an employee-owned retailer, rose out of near-obscurity in the early 2000s and now continues to post record earnings with its top-of-the-range offerings and "upmarket" reputation. Meanwhile, at the lower-end, German retailers Aldi and Lidl have eaten away at the big-four's market share, because of their success at targeting budget conscious customers.

Sainsbury's chief executive Justin King said in a statement that the group was growing at its slowest rate since 2005 and suffered from a tough comparison with the end of 2012. The chain's competitors were hit by the horse meat scandal in the final quarter of 2012, giving Sainsbury's a boost.

"We have seen a decline in sales in the quarter reflecting tough comparatives. This time last year our sales benefited significantly from the discovery of horse meat in some branded and competitors‟ products. We are pleased, however, that market data shows we have maintained market share at 17 percent," said King.

(Read more: Sainsbury's enjoys Christmas boost after tough quarter)

"The later timing of Easter and Mother‟s Day, which fall in quarter one of our new financial year, and unseasonable weather have also contributed to lower market growth year-on-year," he said.

He said growth own-brand ranges was significantly ahead of branded products, which are on average, 20 percent cheaper than a branded equivalents.

(Read more: Sainsbury's Justin King steps down, shares drop)

Rogers told CNBC the group remain committed to being competitive on price.

"We are always going to compete on price. We watch our competitors very carefully. We are confident we can remain absolutely competitive on price," he added

By CNBC's Jenny Cosgrave: Follow her on Twitter @jenny_cosgrave

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