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Sainsbury's has reported a fall in underlying sales, complete with a warning about the 'challenging' nature of the market.

Like-for-like retail sales - excluding fuel - were down 0.8 per cent in the 12 weeks to 4 June as food price deflation continued apace.

In the previous quarter, sales had risen for the first time in two years.

Chief executive Mike Coupe said price pressures meant that 'the market will remain competitive', although he added that he expects Sainsbury's 'to continue to outperform our major peers'.

Total group sales, meanwhile, rose 0.3 per cent for the three months the data covers, aided by a strong performance by the banking arm.