UK supermarket Sainsbury's outpaced big rivals in January

LONDON, Feb 9 (Reuters) - British supermarket Sainsbury (Amsterdam: SJ6.AS - news) 's

continued to outperform rivals in the early weeks of

the year, industry data showed on Tuesday, providing reassurance

for investors ahead of the takeover of Argos-owner Home Retail

.

Total (Other OTC: TTFNF - news) sales at Sainsbury's rose 0.6 percent year-on-year in

the 12 weeks to Jan. 31 and its market share edged up 0.1

percentage points to 16.8 percent, market researcher Kantar

Worldpanel said on Tuesday .

Sainsbury's said last week it had agreed a 1.3 billion

pounds ($1.9 billion) deal to take over Home Retail. It will be

keen to see its share price supported, given the equity

component of the offer.

Its shares were up 1.7 percent at 247.2 pence at 0900 GMT.

Sainsbury's has shown greater resilience to the rise of the

German discounters, Aldi and Lidl, than

its "big four" rivals -- market leader Tesco (Hanover: TCO.HA - news) ,

Wal-Mart's Asda and Morrisons.

It was the sixth Kantar data set in a row that Sainsbury's

has increased its sales. All of the other big four players saw

sales fall and lost market share.

Though Tesco's sales fell 1.6 percent, it did show signs of

improvement, with its best outcome since September last year.

Its shares were up 1.7 percent at 175.4 pence.

Morrisons' sales decline lessened to 2.2 percent. Asda

remained the sector laggard with sales down 3.8 percent.

Both the discount retailers saw their growth accelerate -

Lidl to 18.7 percent and Aldi to 13.7 percent.

Kantar Worldpanel said overall UK grocery market sales rose

0.2 percent over the 12 weeks.

"Consumers are clearly striving for a healthier start to the

year and have turned to fresh foods, particularly fruit and

vegetables, which have both grown sales by 5 percent," said

Fraser McKevitt, head of retail and consumer insight at Kantar

Worldpanel.

The researcher said grocery deflation was 1.6 percent over

the period, reflecting the impact of Aldi and Lidl and the

market's competitive response, as well as deflation in major

categories such as crisps, eggs and butter.

Market share and sales (percent)

12 wks to 12 wks to pct change

Jan. 31 2016 Feb. 1 2015 in sales

Tesco 28.5 29.0 -1.6

Sainsbury's 16.8 16.7 0.6

Asda 16.2 16.9 -3.8

Morrisons 10.8 11.1 -2.2

Co-operative 5.9 5.9 1.4

Aldi 5.6 4.9 13.7

Waitrose 5.2 5.2 0.1

Lidl 4.2 3.5 18.7

Iceland 2.2 2.2 -2.0

($1 = 0.6926 pounds)

(Reporting by James Davey and Paul Sandle; Editing by Kate

Holton and Keith Weir)