Sainsbury's, Britain's second biggest supermarket, today reported another drop in quarterly underlying sales and cautioned that it did not expect a change to competitive market conditions any time soon. 

Earlier this month, the firm completed its £1.4 billion takeover of Argos-owner Home Retail.

It said today that sales at stores open over a year fell 1.1%, excluding fuel, in the 16 weeks to September 24, its fiscal second quarter. 

That was very slightly better than analysts' average forecast of down 1.2% and compared to a first quarter fall of 0.8%. 

The firm said the decline was driven by food price deflation but highlighted like-for-like transaction growth across all channels and total volume growth. 

"We expect the market to remain competitive and the effect of the devaluation of sterling remains unclear," the company's chief executive Mike Coupe said.

"However, Sainsbury's is well positioned to navigate the changing marketplace and we are confident that our strategy will enable us to continue to outperform our major peers," he added. 

With profits squeezed by the growth of German discounters Aldi and Lidl, Britain's "big four" supermarkets - market leader Tesco, Sainsbury's, Asda and Morrisons - are all fighting back with price cuts and service improvements. 

Sainsbury's has both lowered and simplified its prices, reducing the number of promotions and removing most "multi-buy" deals. 

It has also worked to improve the quality and range of its own-brand food and non-food products. 

While the firm has proved more resilient to the discounters than others it has still reported two years of profit declines in a row and analysts forecast a third for the 2016-17 year. 

Prior to today's update analysts were on average forecasting a 2016-17 underlying pretax profit of £517m (pre Argos), down from £587m in 2015-16.

Sainsbury's also issued a trading update on Argos, a general merchandise retailer. In its second quarter to August 27, Argos achieved total sales growth of 3% and like-for-like sales growth of 2.3%.