U.S. Markets open in 1 hr 48 mins

Sainsbury's and UK discounters shrug off tough market-Kantar

LONDON, Feb 11 (Reuters) - British supermarkets Sainsbury's and Waitrose and increasingly popular discount chains Aldi and Lidl increased their market share over the past 12 weeks in the face of an overall grocery market growing at its slowest rate since 2005.

Retailers have said that shoppers are keeping a tight grip on finances even as signs of an improving economy in Britain emerge.

Of Britain's "big-four" grocers, J Sainsbury, battling with Wal-Mart's Asda to be the UK's No.2 grocer, was the best performer in the 12 weeks to Feb. 2, market researcher Kantar Worldpanel said on Tuesday.

The grocer recorded sales growth of 2.7 percent on a year ago, increasing its market share from 17.0 to 17.1 percent.

A 0.5 percent rise in sales for Asda failed to match the overall market growth of 2.4 percent but was ahead of market leader Tesco and No.4 players Wm Morrison who saw sales declines of 0.4 percent and 2.5 percent respectively, and both lost market share.

"Mike Coupe, who will be taking over from Sainsbury's current CEO Justin King in July, will be inheriting the retailer in good shape as it continues to be the fastest growing of the big four - an unbroken run that stretches back nearly two years," Kantar analyst Fraser McKevitt said.

Upmarket grocer Waitrose, the No. 6 player, grew sales by 5.6 percent.

Adding to a tough market for Britain's biggest grocers is an increasing number of shoppers choosing discount rivals such as Aldi and Lidl, both of which posted double digit sales growth in the period and increased their market share.

Together the two chains now account for 7.3 percent of sales, up 1.3 percentage points from last year.

Kantar said grocery inflation was 2.1 percent for the period, the lowest level since July 2010, which offered some respite for hard-pressed household budgets.

Market share and sales growth (percent) 12 wks to 12 wks to pct change Feb 2, 2014 Feb 3, 2013 in sales Tesco 29.2 30.0 -0.4 Asda 17.3 17.7 0.5 Sainsbury 17.1 17.0 2.7 Morrison 11.3 11.8 -2.5 Co-operative 6.1 6.2 0.3 Waitrose 4.9 4.8 5.6 Aldi 4.1 3.2 32.0 Lidl 3.2 2.8 17.2 Iceland 2.3 2.2 3.1 Farmfoods 0.7 0.5 43.9