Sainsbury's may have enjoyed a record-breaking Christmas and increased its market share but investors did not share the firm's celebratory mood.

The company's shares were down 3.5% by 1030 as pessimists latched onto news that like-for-like sales growth of 0.9% in the third quarter had dropped markedly from the 1.9% rise in the previous three months.

The firm also warned its festive bonanza would probably not last into the new year.

"We expect the challenging economic backdrop to persist, with customers looking to re-balance their household budget after the festivities and so spending cautiously in the first few months of 2013," Chief Executive Justin King said.

Like-for-like sales excluding fuel were up 0.9% in the 14 weeks to January 5th, while total sales were up 3.3% (excluding fuel).

The week before Christmas was the supermarket's strongest trading week ever, with customer transactions of over 27m.

The company made a record breaking £16m of sales in one hour between 12pm and 1pm on Sunday 23rd December.

It also enjoyed its best ever Christmas Eve, at both its supermarket and convenience stores, with over £100m of sales.

However, James Grzinic, an analyst at Jefferies, said he expected a further gradual slowing in like-for-like performance.

"Sainsbury has confirmed that it expects like-for-like sales to continue at around 0.9%," he added.

"This formalises a cut to the previous view (set two months ago) that second half like-for-like growth should be broadly in-line with the 1.7% achieved in the first half".

Michael Hewson from CMC Markets said he thought the sell-off appeared "somewhat overdone" given that the slowing sales growth was set against tough comparatives from previous years.

During the quarter, the supermarket said its convenience stores had grown 17%, while online business grew 15%.

Its general merchandise and clothing ranges continued to grow at a faster rate than food, taking market share from rivals in the non-food arena.

Clothing performed particularly well, Sainsbury's said, growing at over 10% year-on-year.

Small electricals, such as toasters and kettles, rose 24% year-on-year, and cookware, grew at nearly 15% year-on-year.

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