Sainsbury set to report first full-year loss since 2005

J Sainsbury is expected to report its first full-year loss in a decade on Wednesday, as the once high-flying supermarket chain suffers from the price competition and property writedowns that afflict much of the food retailing sector.

Analysts estimate that the company's pre-tax profits were £654m for the 12 months to March, before £665m of one-off charges, according to a Bloomberg survey. That would lead to a loss on a statutory basis, in the first set of full-year results since Mike Coupe succeeded Justin King as chief executive in July 2014.

Most of the exceptional items, announced alongside the half-year results in November, are due to the reduced value given to stores that are not profitable or are being built. There could also be further costs related to the group's banking operation.

The writedown of the Sainsbury's property portfolio tipped the grocer into the red at the half-year point as well, as it reported an interim pre-tax loss of £290m against a pre-tax profit of £433m for the equivalent period in 2013.

In April, the UK's biggest supermarket by revenues, Tesco, announced one of the largest losses in British corporate history, driven by £7bn of one-off charges, mostly relating to stores. Another chain, Wm Morrison, announced £1.3bn of property writedowns in March based on an assessment of current market conditions.

Expectations of Sainsbury's underlying performance have fallen sharply: analysts have reduced their forecasts for its pre-tax profits by two-fifths in recent months. Stifel analysts said that the company had gone from "leader to laggard" of the increasingly competitive grocery sector, with German discounters Aldi and Lidl wooing even affluent shoppers.

Analysts' consensus is for Sainsbury to report pre-tax profits of £654m - a decline of more than a quarter compared to the previous year.

This is not Mr Coupe's only tricky issue at the moment. Last week, he was sentenced to two years in jail by an Egyptian court, part of a dispute with the company's former joint venture partner in the company.

Sainsbury said the legal case against him was "groundless". It said it was an "impossibility" for Mr Coupe to have personally seized cheques on July 15 last year, as alleged, because he was "in London carrying out his normal duties that day".

Mr Coupe has promised to cut £500m in costs over three years, with 800 jobs to go but more staff to be present on the shop floor. "We are facing into a once-in-a-generation combination of cyclical and structural change in the industry," he said in November.

According to an internal review, three-quarters of Sainsbury's current stores are in the right place and of the right size. The remainder have spare space for sales of non-food items or concessions to other companies. The chain is also due to open eight new supermarkets by early 2018.

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