Sainsbury's to issue sales warning

SAINSBURY'S is set to warn the market this week that sales growth continues to slow as food price inflation disappears.

Justin King, Sainsbury's chief executive, is also likely to use the announcement of the group's annual results to voice only "cautious optimism" about prospects amid rising concern about consumers facing tax rises – including possibly on VAT.

King is expected to cite the likely impact on consumer sentiment of unemployment arising from massive public spending cuts following last week's general election.

Britain's third biggest food retailer after market leader Tesco and Asda is expected to unveil annual pre-tax profits of between 577 million and 606m on Thursday.

The City consensus for underlying pre-tax profits in the year to March is 594m, compared with 543m in the previous 12 months.

The dividend consensus is 14.2p, compared with 13.2p last time, as Sainsbury's conserves cash for an already-announced ambitious store-opening plan.

City expectations on current trading are modest after rival Morrisons last week unveiled like-for-like sales growth of just 0.8 per cent in the 13 weeks to 2 May.

The company cited the virtual disappearance of food price inflation, with City opinion divided as to whether this will lead to price deflation.

King is also expected to say that Sainsbury's Bank has remained in the black in its latest trading year.