Sainsbury’s has seen a 14% drop in annual profits before tax, after being forced into a price war with the discounters.

Including one-off items such as profits or losses on property, the supermarket made a return to profit of £548 million in the 52 weeks to March 12 from a £72 million loss a year earlier. However, underlying profit before tax, which excludes such one-off items, fell 13.8% as the ongoing price war in the sector continued.

Mike Coupe, chief executive of Sainsbury's, commented: “Ongoing pricing pressures and food price deflation have impacted our sales and operating margins. As a result, underlying profit and earnings per share are down this year versus last year.”

However, he added: "The market is competitive, and it will remain so for the foreseeable future. We believe we have the right strategy in place and are taking the right decisions to achieve our vision to be the most trusted retailer where people love to work and shop."

David Tyler, chairman of Sainsbury's, added: "Our strategy is built on the fundamental strengths of our business - great heritage, quality food, fair prices and strong values. It recognises that customers will increasingly shop through multiple channels and according to their varying needs. Our business will continue to evolve and adapt to changing shopping needs, ensuring that we exceed customer expectations in an increasingly fast-paced, digital world.

"We are focused on building shareholder value and are confident that by following our established strategy, driving efficiencies and managing costs carefully, we will achieve this.  We are committed to paying an affordable dividend to our shareholders and have maintained this at 2.0 times cover. We are therefore recommending a final dividend of 8.1 pence per share this year, making the proposed full year dividend 12.1 pence per share."

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