Sainsbury's keeps its head above water

Sales weakened over the year, with 1.4 per cent like-for-like growth in the first half followed by a 1.1 per cent decline in the second. This left underlying retail sales just 0.2 per cent higher for the year. The posh Taste the Difference range experienced double-digit sales growth, hitting about £1.1bn of sales, while general merchandise grew at twice the rate of food.

The other notable piece of information was that capital spending fell to just £888m - well below previous guidance of £1.1bn. It will remain at this level this year, but reduce further in 2015-16 as the supermarket reigns in the pace of new-space growth, focusing instead on the existing store estate. Management has already binned some sites intended for new supermarkets, resulting in a £92m impairment charge.

Sainsbury's is clearly feeling the squeeze as German discount chains Aldi and Lidl grow increasingly popular with middle-class shoppers. The recent price cuts announced by Morrisons and Tesco also loom large. However, outgoing chief executive Justin King noted that discounting was not the only source of market growth: convenience has also performed well, with Sainsbury's Local stores showing sales growth of 19 per cent last year. He also brushed aside talk of a 'price war', stressing that such skirmishes are a constant feature of the industry. Incoming chief executive Mike Coupe added that Sainsbury's competes heavily on price, but would win out thanks to differentiation - namely good own-label products, ethical sourcing and tidy stores.

Sales-growth guidance for this year is on a par with last year's growth rate, but profit forecasts range from £700m to more than £800m, reflecting a high degree of uncertainty. Shore Capital expects adjusted pre-tax profit of £795m for 2015, giving EPS of 30.8p.