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UPDATE 1-Sainsbury's sales dented by weak general merchandise and clothing demand

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LONDON, July 3 (Reuters) - British supermarket group Sainsbury's reported a third consecutive quarter of declining underlying sales, hurt by weak clothing and general merchandise markets.

The group, which had its 7.3 billion pound ($9.2 billion)takeover of rival Asda blocked by the UK competition regulator in April, said on Wednesday its like-for-like sales, excluding fuel, fell 1.6% in the 16 weeks to June 29, its fiscal first quarter.

The outcome compares with analysts' forecasts in a range of down 1.1% to down 2% and a fall of 0.9% in the previous quarter.

"Retail markets remain highly competitive and promotional and the consumer outlook continues to be uncertain," Sainsbury's said.

The group said while total grocery sales fell 0.5%, general merchandise sales declined 3.1% and clothing sales were down 4.5%.

Despite the sales falls Sainsbury's said it gained market share in key general merchandise categories and in clothing, where it is now the UK's fifth largest retailer by volume.

Recent official data and updates from peers, including market leader Tesco, had already outlined a difficult backdrop for retailers in the period, reflecting ongoing political uncertainty and a tough comparison with the same quarter last year when Britain enjoyed record hot weather and major events including a royal wedding and the men's soccer World Cup.

With Sainsbury's shares down 37% over the last year Chief Executive Mike Coupe is under pressure to show the group can prosper on its own after the Asda debacle. He will face investors on Thursday at the group's annual shareholders' meeting.

In May he vowed to improve stores, cut prices on daily essentials and invest in online to restore sales growth.

Since February Sainsbury's has reduced prices on over 1,000 own brand products including dairy, meat, fish, poultry and fresh fruit and vegetables.

Prior to Wednesday's update analysts were forecasting that profits would go backwards in Sainsbury's 2019-20 year. The pretax profit consensus was 632 million pounds, down from the 635 million pounds made in 2018-19.

Shares in Sainsbury's closed Tuesday at 199.5 pence, valuing the business at 4.43 billion pounds. (Reporting by James Davey; editing by Kate Holton)