New stores, cost cutting and demand for online and convenience shopping helped grocer J Sainsbury meet first-half profit forecasts in a tough trading environment the group said was set to continue.

Britain's third-biggest supermarket group behind Wal-Mart's Asda and industry leader Tesco said on Wednesday profit before tax and one-off items rose 6.6 percent to 354 million pounds in the 28 weeks to October 1.

That was just above the average forecast of 352 million pounds in a Reuters poll.

We expect the economic environment to remain challenging for the foreseeable future but we are confident of further good progress in the Christmas period ahead, Sainsbury's said.

Retailers are mostly struggling as shoppers' disposable incomes are squeezed by higher prices, muted wages growth and austerity measures, and they fret about a stagnant housing market, job security and a fragile economic recovery.

Electronics group Kesa said on Wednesday it had sold loss-making chain Comet for just 2 pounds.

Sainsbury's has outperformed sales growth at its main rivals for most of the past few years as it opens more stores outside its south England heartlands, expands into convenience and online shopping and introduces more non-food ranges.

But its shares have suffered recently from fears it has less financial firepower than rivals to respond to a recent price cutting drive by Tesco. Sainsbury's said its net debt rose 301 million pounds to 2.1 billion in the first half.

Figures on Wednesday showed the impact of the grocery price battle, with food price inflation falling to 4.2 percent in October from 5.0 percent in September.

Data on Tuesday also showed Sainsbury's growing sales in line with Tesco, but lagging Asda and Wm Morrison, which reports third-quarter sales on Thursday.

Sainsbury's said it offset higher costs with 50 million pounds of savings and its underlying operating profit margin nudged up 3 basis points to 3.39 percent, or up 10 basis points at constant fuel prices.

The interim dividend was 4.5 pence a share, up 4.7 percent on the year, and the group said its new stores were achieving their target for return on investment and the value of its properties had risen 400 million pounds to 10.9 billion.

Sainsbury's shares have underperformed the STOXX 600 European retail index by 13 percent this year. They closed at 300.3 pence on Tuesday, valuing the 142-year-old group at about 5.6 billion pounds.

(Reporting by Mark Potter; Editing by Helen Massy-Beresford)