The head of the UK's second-biggest supermarket chain, J Sainsbury, has admitted that it could be overtaken by third-ranked Asda.

"They may well catch us up," Sainsbury chief executive Sir Peter Davis said on Friday.

"I've always said Asda are breathing down our neck. Their rate of growth is better than anybody's in the industry."

Sainsbury's relegation to third position would mark a major realignment in the UK supermarket sector, currently facing a tougher trading environment as consumer spending slows.

Asda, widely rumoured to be planning to buy fourth-ranked Safeway, has expanded rapidly since being taken over by the US retail giant Wal Mart in 1999.

Leapfrogging Sainsbury would put Asda in a position to challenge the market leader, Tesco.

Reassurance

Sir Peter's comments came as Sainsbury dispelled fears that it may undershoot its financial targets with a better than expected set of sales figures.

The company said sales in the 16 weeks to mid-October were up by 2.4% compared with the same period one year earlier, including petrol but stripping out sales in newly-opened stores.

The figure fell short of the 2.7% sales increase the firm reported for the 12 weeks to mid-June, but the company said an ongoing refurbishment programme should lure more shoppers into its stores in the second half of the year.

It added that its new Nectar customer loyalty card would also boost sales in the months ahead.

City investors welcomed the news, marking Sainsbury shares up more than 9% to 276.25p in afternoon trade.