Sainsbury's, to post full-year profits of well over £600 million

The UK's third biggest supermarket, Sainsbury's, will post healthy full-year profits of well over £600 million on Thursday but there are growing concerns over the impact of slowing food inflation on sales growth.

Results from Morrisons this week - which saw like-for-like sales growth of just 0.8% in the quarter to May - underlined the pressure on the grocers in a fiercely competitive sector.

But Sainsbury's - which grew sales 1.7% in the 11 weeks to March 20 - has an added string to its bow in its burgeoning non-food presence, which includes clothing and homewares under its Tu label.

At its last update, Sainsbury's said online sales were up 15%, while non-food ranges were growing at three times the rate of food.

Chief executive Justin King - who raised an additional £445 million war chest to spend on store expansion last June - will now come under pressure to turn this into bottom-line profits growth.

Seymour Pierce analyst Freddie George is forecasting "top of the range" pre-tax profits of £625 million - up from £543 million last year - but has worries over the outlook for the food retailers.

His gloom is fuelled by concerns over tougher competition, with Asda looking to make up lost ground after a spell in the doldrums with an aggressive price campaign.

Food inflation will remain subdued and rising fuel costs will eat into monthly budgets, while there are limited opportunities for growth in food without cannibalising sales from other stores, he adds. "The upshot is that it will be more difficult to grow sales and the margin gains seen over the last three years are unlikely to be repeated," the analyst warned.

Deutsche Bank, which is expecting full year profits of £600m, said that it expects growth to have slowed over the second half of the supermarket's yearThe company, which has 525 supermarkets and 303 convenience stores, opened its first shop in 1869.