JSainsbury laid bare the growing dominance of Britain’s supermarkets yesterday by dismissing the doom and gloom surrounding the high street and saying it expected to “thrive” in the current slowdown.

Justin King, chief executive, said that like-for-like sales rose 3.7 per cent in the final quarter of 2007 with non-food sales growing at three times the rate of Sainsbury’s core food and drink ranges.

Sainsbury’s sold four times the number of computer games in December and five times as many cashmere jumpers.

Mr King said there was no doubt that the consumer budget was stretched and that competition to grab the customer’s “tightly held penny” had never been tougher.

Promotions are now run on 30 per cent of Sainsbury’s product lines, against 20 per cent a year ago.

However, Mr King added: “We do not subscribe to the view that it’s all gloom and doom, and we are well-equipped to thrive in the tough and challenging environment.

“Our nonfood business is growing very strongly and clearly that is coming from somewhere.” The comments came a day after Marks & Spencer triggered the biggest one-day rout of the City’s retail stocks for 20 years with a warning over the trading outlook.

Mr King said Sainsbury’s performance should prove its critics wrong and the shares, which have tumbled 40 per cent since last summer, rose sharply by 6.4 per cent, or 23½p, to 388½p yesterday.

The Times reported on Monday that Sainsbury’s, a bid target twice last year, was understood to have missed internal sales and profit targets in December amid fierce competition.

Sainsbury’s refused to separate out its festive sales performance from the wider 12-week period yesterday.

However, Mr King said Sainsbury’s had now achieved one of the key targets of his turnaround strategy – growing revenue by £2.5 billion from March 2005 – three months early.

Looking forward, he forecast fierce competition in the coming year, but refused to be drawn on whether he agreed with Marks & Spencer’s view that the softening economy could hit consumer demand until 2009.

Mr King said: “The improvements we have made to our business during our recovery means we are well equipped to perform in this challenging environment and we remain confident of our ability to deliver our growth plans.”

Sainsbury’s said that while customers were buying more basic value ranges, the premium Taste the Difference product range was also selling well.

Mr King also pointed out that, despite the pressure on wheat and dairy costs, food price inflation was running at just 1 per cent. “We will work very hard to ensure our customers don’t experience higher prices,” he said.

Sainsbury’s is the first of the quoted grocers to report numbers covering the Christmas period. Asda, which is owned by US giant Wal-Mart, said on Wednesday that it had served a million more customers in Christmas week than the previous year.

Market share figures from TNS two days ago signalled that Morrisons was the big Christmas winner with total sales up by nearly 10 per cent year on year.

Tesco, Britain’s biggest supermarket, will report next Tuesday. TNS said its growth rate had slowed to 4.2 per cent in December from 6 per cent in November.

Sainsbury’s is expected to post pretax profits of £485 million over the year to March 2008, against £380 million for the prior 12 months.

Andrew Kasoulis, analyst at Credit Suisse, said the trading update was “robust”, but maintained an underperform rating on the stock.

He said: “We think recovery continues faster elsewhere, for example Morrisons.”

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