However, the lack of a profit upgrade and weakness in the general merchandise market sent its shares 4.8% lower on Wednesday, paring gains over the last year to 18.5% after the stock had on Tuesday hit levels not seen since 2021.
One top 30 investor in Sainsbury's said the update was "a small disappointment", noting some analysts had been forecasting 2023/24 full year profit above its stated range.
"Underlying, you've got a really decent performance in grocery," he added.
Sainsbury's, which with a 16% share of Britain's grocery market trails only Tesco (TSCO.L), said its like-for-like sales, excluding fuel, rose 7.4% over the 16 weeks to Jan. 6, as its ability to sell more products offset lower inflation.
Grocery sales rose 9.3%. But, general merchandise sales, including those at its Argos chain, fell 0.6% in a "highly promotional" market, while clothing sales fell 1.7%.
In grocery, the group said it benefited from a range of new product launches that tapped into a trend of cash-strapped consumers wanting to cook and entertain at home.
The group's strong performance in food contrasts with industry data, published on Tuesday, showing lacklustre retail sales around Christmas which may add to concerns that Britain's economy has tipped into a mild recession, less than a year before a likely national election.
Shoppers have had to contend with high inflation and interest rates at a 15-year high of 5.25% in response to the jump in prices.
Sainsbury's is benefiting from matching discounter Aldi's prices on key items and providing better prices to members of its Nectar loyalty scheme, financed by a plan to take 1.3 billion pounds ($1.7 billion) of costs out of the business in the three years to the end of March.
It is also being helped by people staying at home rather than eating out, with sales of its premium 'Taste the Difference' range up 13% in the quarter.
Sainsbury's said it still expected 2023/24 underlying pretax profit of between 670 million pounds and 700 million pounds versus 690 million pounds in 2022/23.
"We enter 2024 with strong momentum," CEO Simon Roberts said.
The group plans to update on its strategy on Feb. 7.
($1 = 0.7873 pounds)
