We have foundations for growth, says Sainsbury's

But chief executive Justin King said the group is in a strong position with low inflation making life a bit easier for customers.

"We have really strong foundations for growth, we compete well on price and value," he said. "We can flourish when consumers have extra money, but we can also flourish in a downturn when consumers come under pressure. Customers trust our own-label products."

Sainsbury's, the third biggest grocer behind Tesco and Leeds-based Asda, is hoping to counteract the downturn by expanding its non-food products and opening more convenience stores.

Mr King said supermarkets still account for less than 15 per cent of the non-food market so there is plenty of growth to go for.

Sainsbury's reported a better than expected 17.5 per cent increase in pre-tax profits to 610m in the year to March 20.

Mr King said the group is now serving 19 million customers a week, one million more than last year.

The performance comes amid fierce competition between supermarkets.

Last week Bradford-based Morrisons said food inflation has been virtually eliminated as falling commodity prices bring down food costs.

Morrisons reported a 0.8 per cent rise in like-for-like sales during the 13 weeks to May 2 .

Sainsbury's said its like-for-like sales rose by 1.7 per cent in the three months to March 20. It refused to comment on current trading.

The group opened 38 new supermarkets last year and has pinpointed convenience stores as a key area of growth, with up to 100 new stores in the format planned this year.

It has identified Yorkshire as a key target area for expansion and is sizing up a number of sites for new stores.

Sainsbury's is keen to expand out of its Southern heartlands into Yorkshire, Lancashire, the North East and Scotland.

While the retailer has a 20 per cent market share in the South, it has just 10 per cent in the North. In Yorkshire its market share is just 11.2 per cent, making it a key target area for expansion. The group has 40 stores in Yorkshire, out of a total of 872.

Around 80 per cent of the group's future expansion plans will be targeted at the North and Scotland.

Sainsbury's shares closed up 3.2 per cent last night, a rise of 10.5p to 338.5p.