Wires

UPDATE 1-Sainsbury's Christmas quarter dented by weak general merchandise

(Adds details)

LONDON, Jan 8 (Reuters) - Sainsbury's, Britain's No. 2 supermarket group, reported a small fall in underlying sales in the key Christmas quarter, with a solid performance from food more than offset by a weak general merchandise market.

The group, which is trying to rebuild investor confidence in its strategy following a botched attempt to take over rival Asda , said on Wednesday like-for-like sales, excluding fuel, fell 0.7% in the 15 weeks to Jan. 4, its fiscal third quarter.

That compares with a second quarter fall of 0.2%.

Sainsbury's said that while grocery sales grew 0.4%, slightly ahead of analysts' expectations, general merchandise sales were down 3.9%.

The group said colder weather helped drive a 4.4% increase in clothing sales, while party and gifting ranges performed well. It said its Argos business outperformed the market in consumer electronics, but the toy and gaming markets declined year-on-year.

"Retail markets remain highly competitive and promotional and the consumer outlook continues to be uncertain. However, we are well placed to navigate the external environment and are executing well against our strategy," Sainsbury's said.

Chief Executive Mike Coupe told BBC radio he was comfortable with analysts' average forecasts for full year 2019-20 profit - underlying pretax profit of 584 million pounds ($768 million down from 601 million pounds in 2018-19. ($1 = 0.7609 pounds) (Reporting by James Davey; editing by Kate Holton)