Sainsbury's set to reveal first loss

SAINSBURY'S is expected to announce the first loss in its 135-year history when new chief executive Justin King unveils his review of the troubled group on Tuesday.

The supermarkets giant has already been forced to downgrade estimates of first-half profits to between £125m and £135m - almost two-thirds below last year's figure.

But the City now expects that one-off costs associated with the radical reforms that King proposes will plunge the company into the red. The scale of the write-offs could run into hundreds of millions of pounds, analysts suggest.

The announcement will come a week after WH Smith posted the worst set of figures in its 212 years, blaming a £135m deficit on competition by cost-cutting rivals.

Sainsbury's, which has also suffered in the face of tough pricing from Tesco and Asda, has had big problems with its warehousing and distribution. Empty shelves have left millions of customers frustrated.

A £3bn scheme to update the supply system launched by former chief executive Sir Peter Davis, failed spectacularly and a write-down on the project is likely to form part of the exceptional costs that will drive the company into loss.

King is also expected to announce hundreds of redundancies at head office in London and a dividend cut from 15.7p a share to as little as 5p.

Retail analysts expect Sainsbury's to refocus on quality and range rather than cutting prices. And a shift back to core food products is also likely.

But King is thought to have ruled out a widespread sale and leaseback programme to cash in on the chain's property portfolio.