British supermarket Sainsbury's is expected to post its first annual profit fall since 2005, hurt by an industry price war that shows no sign of abating.

Sainsbury's, along with rivals Tesco, Asda and Morrisons, is grappling with food price deflation and an intensifying price war launched to stem the flow of shoppers to discounters Aldi and Lidl.

All are also having to adapt as consumers shop more frequently and locally, and buy more online.

"We expect the group to confirm more pain is likely in the year ahead, with further like-for-like (sales) declines the key challenge," said Jefferies analysts.

Sainsbury's shares have fallen 17 per cent over the last year.

Analysts' on average expect Sainsbury's to report underlying pretax profit of £659 million ($1 billion) for the year ended March 14, down 17 per cent from the £798 million ($1.2 billion) made in 2013-14.

The fall reflects Sainsbury's announcement in November to invest an additional £150 million in lower prices, as well as its absorption of record levels of food deflation in categories where it trades strongly, such as produce, dairy, fresh ready meals, meat and fish.

In March, the firm reported a 1.9 per cent fall in fourth quarter like-for-like sales, a fifth straight quarterly decline.

Chief executive Mike Coupe reckons price reductions financed by cost cutting, simpler promotions and a focus on product quality and innovation, as well as expansion of its non-food, online and convenience business, can combat the discounters' threat and that of market leader Tesco, which is showing signs of recovery under new boss Dave Lewis.

Analysts on average forecast a full-year dividend of 12.9 pence a share, down 25 per cent.-Reuters