Britain's third-biggest food seller J Sainsbury Plc reported a rise in fourth quarter sales and said it was gaining customers from rival Morrison.

The supermarket chain, widely touted as a potential takeover target, said like-for-like sales rose 3.7 per cent in its fourth quarter, including petrol sales and adjusting for the Easter break, which falls at the end of the period.

Last year, Easter came later. Total sales for the 12 weeks to today rose 7.2 per cent, 5.4 per cent stripping out petrol sales.

Analysts welcomed the results. "So far so good," said David Stoddart, retail analyst at broker Teather & Greenwood. "It looks reasonably encouraging."

Sainsbury is battling to recover from years of underperformance when it lost ground to cut-price rivals Tesco and Asda.

But the trading environment for supermarkets has got tougher since Wm Morrison Supermarkets bought Safeway in 2004 to become a close-challenging fourth to the top three supermarkets.

However, Morrison's takeover of Safeway has not been all bad for the sector and Sainsbury has gained customers from the former Safeway stores, chief executive officer Justin King told reporters in a conference call.

"I think that the things we do really well - which is fresh food, the range that we offer, the service that we have at our counters - are all things that some customers are struggling to find in converted Safeway stores," he said.

Shares were one per cent higher at 290 pence in morning trade on Thursday. Sainsbury's poor record has made it the object of persistent takeover speculation.

The Sainsbury family owns about a third of the shares and their holding is key to any potential takeover offer. Mr King said the family still supported his recovery plan.

"I've always said that the best way to do away with takeover rumours is run a better business, and hopefully today is a first but important sign that we are now running a better business," he said.