Sainsbury's has reported its first fall in sales for nine years and says the grocery market is growing at its slowest rate since 2005.
In the 10 weeks to 15 March, like-for-like sales, which strip out trading at new stores, fell 3.1% excluding fuel.
It blamed a fall in food prices, the later timing of Easter and unseasonable weather for the decline in sales.
In addition, Sainsbury's sales had been boosted last year by the discovery of horsemeat in competitors' products.
End QuoteWe are not taking advantage of lower prices at the supermarkets to buy more from them, or buy more extravagantly"
Prior to the fourth quarter, Sainsbury's had reported growth in like-for-like sales for 36 consecutive quarters.
"Of course it's disappointing, but it has to be put in context," chief executive Justin King told the BBC.
Mr King said the supermarket chain had maintained its 17% market share, and he was still confident it would outperform its supermarket peers in the year ahead.
The group said sales of its own-brand ranges, were "significantly ahead" of branded products.
And it said general merchandise and clothing had also performed well, with menswear sales up 23% year-on-year.
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However, it said it expected shoppers would still be under pressure for some months to come.
"Although some economic indicators are showing an improvement in the health of the economy, we expect the outlook for customers to continue to be challenging for the coming year," said Mr King.
Mr King is due to leave the supermarket chain in July, after 10 years at the helm.
Mike Coupe, Sainsbury's group commercial director, will succeed him as chief executive.
George Scott, food and grocery analyst at Conlumino, said the sales drop was not as bad as it looked.
"A negative performance does certainly signal a weakening in its market authority," he said.
"However the Sainsbury's brand is well placed for more sustained market traction, as consumer spending begins to pick up."
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