British supermarket Sainsbury's has today warned the financial pressures building on consumers would "only intensify" this year after it reported a 4% drop in underlying quarterly sales, driven by falling demand for general goods.

With inflation surging and customers slashing spending, Britain's second biggest supermarket said sales of grocery items fell 2.4% over the 16 weeks to June 25.

General merchandise sales of non-food goods dropped by 11.2%.

The results, described as in-line with expectations, followed a warning in June from market-leader Tesco that Britons were buying less and switching to cheaper products.

Its underlying sales fell by 1.5%, while smaller rival Morrisons reported a sales slump of 6.4%.

Chief executive Simon Roberts said Sainsbury's understood how hard it was for millions of households right now.

"The pressure on household budgets will only intensify over the remainder of the year and I am very clear that doing the right thing for our customers and colleagues will remain at the very top of our agenda," he said today.

UK consumer confidence has plummeted as households struggle with the accelerating cost of living.

Wages are failing to keep pace with inflation that reached 9.1% in May and is heading for double digits. Food inflation is predicted to hit 15% this summer and 20% early next year, according to some forecasts.

Sainsbury's is spending £500m over the two years to March 2023 to keep a lid on prices and encourage shoppers not to switch to discounters.

Sainsbury's says customer perception of its value and quality is improving and it is winning market share.

But more of its sales come from general merchandise than its rivals due to its standalone Argos brand, increasing its exposure to pressure on consumers' disposable income.

Sainsbury's maintained its full year pretax profit guidance of £630m to £690m, down from £730m in 2021-22.

The company also said its chief financial officer Kevin O'Byrne would retire in March 2023 and would be succeeded by commercial and retail finance director Blathnaid Bergin.