British supermarket Sainsbury's said its full-year profit was set to exceed analysts' average forecast, despite the firm posting a seventh straight quarter of falling underlying sales.
The grocer said on Wednesday it now expected its 2015-16 underlying profit before tax to be moderately ahead of the published consensus of £548 million ($831 million) if current market trends continue. That would be down from £681 million made in the 2014-15 year.
Sainsbury's has shown greater resilience to the rise of German discounters Aldi and Lidl than its big four rivals, market leader Tesco, Wal-Mart's Asda and Morrisons, helped by the continued expansion of its convenience store estate.
However, its sales at stores open over a year still fell 1.1 percent, excluding fuel, in the 16 weeks to Sept. 26, its fiscal second quarter, hurt by fierce competition with rivals that has contributed to ongoing price deflation.
That compared with analysts' average forecast of a decline of 1.3 percent and a fall of 2.1 percent in the previous quarter.
Sainsbury's total sales, excluding fuel, rose 0.3 percent.
"During the quarter we saw an improvement in our key trading metrics. Both volume and transactions grew as the decline in average basket spend in supermarkets continued to stabilise," said Chief Executive Mike Coupe.
"Whilst the market is clearly still challenging, with food deflation impacting many categories, we are making good progress on delivering our strategy."
Sainsbury's, in common with its major rivals, is battling to stem the flow of shoppers to the discounters through price cuts and improvements to product quality and service, financed by cost savings and dividend reductions.
Coupe has previously said he expects like-for-like sales to be negative in the full 2015-16 year.
Shares in Sainsbury's, down 13 percent over the last six months, closed Tuesday at 229.3 pence, valuing the business at 4.42 billion pounds ($6.7 billion).
Earlier this month Morrisons posted a 2.4 percent fall in second quarter like-for-like sales, while in August Asda reported a 4.7 percent slump in underlying sales for its first quarter. Tesco will update on its second quarter on Oct. 7.
Follow us on Twitter: @CNBCWorld