Price wars take toll on Sainsbury’s

THE supermarket price war and dramatic deflation at the tills will send profits falling for the first time in a decade at Sainsbury’s.

Britain’s third biggest grocer is the last of the main quoted supermarket chains to present its annual results. While analysts forecast pre-tax profits to slip to £659m from £768m it is not expected to mirror the tranche of bad news seen last week from rival Tesco.

The market leader posted its worse ever loss and a £7bn one-off charge largely linked to property.

Sainsbury’s (down 0.4p to 271.7p) got most of its bad news out at a strategic review in November when it wrote down its property and also issued a one-off charge, of £628m. It also said it was cutting the roles of 800 department managers but has not shrunk its store estate.

Analysts at Barclays said: ‘Both Tesco and Morrisons have announced store closures in 2015 – we doubt that Sainsbury’s will follow to a meaningful extent, but it will be interesting to hear management’s thoughts on this.’

It recently posted a 1.9pc decline in fourth quarter underlying sales for the ten weeks to March 14.

All the grocers have been struggling with a shift in the way consumers shop towards smaller, more frequent purchases. There has also been a boom in demand online. But competition from discounters Aldi and Lidl, as well as price deflation, have taken their toll.

Back in November chief executive Mike Coupe unveiled a plan to cut prices by £150m and improve the quality of 3,000 products.

Barclays said: ‘We would expect the company to provide data showing improved price perception in recent months. Secondly, we would expect Sainsbury’s to provide a first impression of the progress of its Netto joint venture.’

Sainsbury’s set up the rival stores with the Danish group to compete with Aldi and Lidl with plans to have 15 by the end of the year.