EMBATTLED supermarket operator Sainsbury has drawn encouragement from its Christmas trading performance despite posting another fall in sales.

The company, which recently announced losses for the first time in its 135-year history, said like-for-like sales in the four weeks to January 1 fell 0.4 per cent.

(When petrol sales were included this figure became a 2.5 per cent gain.)

The 0.4 per cent fall compared well with the 1.2 per cent fall for the last 12 weeks of the year.

Chief executive Just-in King, who launched a sales-led turnaround programme in October, described the trading results as a "good first step."

He added: "After a difficult November, there was an improving trend over the Christmas and New Year period, which is encouraging given the tougher comparatives for the same period last year."

The company has been dogged by supply chain problems but now says it was pleased with levels of stock availability over Christmas, as well as with customer service after it recruited an extra 3,000 staff.

Sainsbury's described the last three months of the year as "very competitive" and warned that the first quarter of 2005 was likely to be just as tough.

It said it had taken on rivals Asda and Tesco with price cuts on 6,000 products in the last year.

In November, Sains-bury's recorded half-year losses of 39 million after one-off costs from Mr King's turnaround plan hit bottom-line figures.

Industry research published last week suggested that Sainsbury's had stabilised its performance.

Till roll data from analysts TNS said the chain slowed its rate of decline and now accounted for 15.9 per cent of all supermarket sales, although this is lower than the 16.3 per cent share of the market it held 12 months ago.

Tesco maintained its dominant position in the sector by claiming a 29 per cent market share, up from 26.6 per cent a year ago.

l Welsh fashion chain Peacock had a mixed Christmas with a sales slump at its Bonmarche shops and a sales surge at its Peackock outlets.

Sales at Bonmarche in the 13 weeks to January 1 fell by 8.5 per cent: the result off the clothes being "too fuddy duddy" according to chief executive Richard Kirk.

Mr Kirk said he did not regret buying the Bonmarche chain for 61 million in 2002, but said he had underestimated how tough the market was.

Peacock stores account for 60 per cent of the group's operating profit and enjoyed a Christmas boom with sales up by 9.5 per cent.