Tesco – Britain's biggest retailer – yesterday met forecasts with a slower rise in UK sales in the third quarter but signalled it would continue to outstrip rivals going into the key Christmas trading period.

Strategy and finance director Andrew Higginson said Tesco was "looking good" moving into the final three weeks of crucial Christmas trading amid warnings British retail faces one of its worst holiday shopping seasons on record.

"There's all to play for, but so far so good, we are looking forward to having a good Christmas," he said.

Underlying sales at Tesco's core British business rose an expected 5.6 per cent in the 13 weeks to November 25, down from a 6.6 per cent pace in the second quarter, as price cuts and a boom in its online business failed to offset a subdued market.

Exane BNP Paribas analyst Tim Attenborough said Tesco has posted a "very respectable set of numbers".

"But they're in line and Tesco watchers over the years have become used to better than that," he said.

Tesco has piled on market share in recent years, branching out of its traditional food business into more profitable clothing, household goods and financial services sectors as well as expanding internationally.

Having pulled in customers with price cuts, it now accounts for almost one pound in every three spent in British supermarkets.

Yet, competition has toughened in recent months as grocery rivals Sainsbury and Marks & Spencer proved quicker at responding to shoppers shift away from price to better-quality and ethical produce.

Mr Higginson said Tesco's growth in organic and its highest level Finest range was "very strong" and it was well-positioned to take advantage of the trend towards shoppers trading up.

"We continue to like the long term story of the company, but feel that it is all in the current price," JP Morgan analysts wrote in a research note. They said Tesco shares trade at 16.7 times 2007 earnings forecasts versus a sector average of 15.7.

Third quarter inflation of 0.8 per cent was also easing and going forward Higginson said he expected the pricing environment to be "flat to slightly deflationary".

Tesco was also on track to have 60 per cent of its group space – and 20 per cent of its profits – outside Britain by the end of the year after losing out to Wal-Mart last month on a deal to enter India.

Mr Higginson said the group was in talks with other possible partners in India and opened on Monday its US headquarters ahead of stores openings there at the end of next year.

Meanwhile, a new report yesterday predicted that more than a million and a half workers will pull a sickie over the next few weeks to go Christmas shopping.

Research by insurance firm Scottish Widows showed that huge numbers of people were planning to fake an illness or even a doctor’s appointment to help them finish their festive preparations.

A survey of 1,600 adults showed that younger workers were most likely to take time off in the week to buy presents.

Edinburgh topped the sickie chart, with 14 per cent of people polled planning to take a day off, while Londoners threw the least number of Christmas sickies.

Women were more likely to buy presents in November, while seven per cent of men said they would leave it until Christmas Eve to buy gifts.

>> Woolworths issue Christmas warning