Discounters to break Sainsbury's three-year run of booming sales as Next overtakes Marks & Spencer

By Rupert Steiner for the Daily Mail

Updated: 03:34 EDT, 17 March 2014

Falling sales: Sainsbury's is expected to feel the impact of the low-cost chains

The retail world will be turned on its head this week as the discounters finally break Sainsbury’s three-year run of sales growth while annual profits at Next will overtake Marks & Spencer’s for the first time.

The stark impact of the low-cost chains on established grocery and fashion players will be laid bare in fresh trading updates.

Sainsbury’s has been the last of the Big Four supermarkets to feel the full force of the discounters, having been insulated by its range of own-brand products and its successful Live Well For Less promotion.

But analysts are predicting a fall of 3 per cent in underlying sales compared to this time last year when it was up 3.6 per cent due to the timing of Mother’s Day and its sponsorship of Comic Relief pulling in more shoppers.

This will also be well down on the 0.2 per cent growth seen in Sainsbury’s Christmas update.

The sharp reversal of fortune will be a personal disappointment for chief executive Justin King, who will hand over his crown to commercial director Mike Coupe in July and wanted to leave on a high.

All of the grocers have been suffering from fierce competition wrought by the increased dominance of Aldi and Lidl. Last week Morrisons issued its second profit warning of the year but sent a shiver down the High Street with plans to start a price war with an investment of £1billion in discounting products.

Clive Black, an analyst at Shore Capital, said: ‘Sainsbury’s is expected to report a dull fourth-quarter performance, albeit considerably better than Morrisons and Tesco. To be fair to the company, it is up against a tough comparative.’

Apart from the discounters, supermarkets are suffering from an easing of inflation, shoppers wasting less food, and a shift to buying smaller, more frequent baskets of food. Its three main rivals have recently announced plans to take an axe to prices.

Upbeat: Annual profits at Next are expected to overtake Marks & Spencer's for the first time

Kantar Worldpanel research figures for the past four weeks reportedly show Sainsbury’s sales fell 0.7 per cent, down from growth of 2.2 per cent in the overall 12-week period.

At clothing retailer Next, the decision to hold firm and resist pre-Christmas discounting looks likely to have pushed profits past those of rival Marks & Spencer for the first time since it was founded in 1982.

M&S and a raft of High Street clothing retailers, including Debenhams, caved in to hefty pre-Christmas discounting, which hurt profit margins.

Next has said it went into the January sales with 11.5 per cent less stock to sell after a strong festive period. It expects to earn between £684million and £700million in its full-year underlying pre-tax profits, topping the £628million forecast for M&S.