British supermarket group Sainsbury's followed market leader Tesco in warning that soaring inflation would lower profit in the current financial year, taking the shine off a more than doubling of annual profit.

Sainsbury's said today that its underlying profit before tax in 2022-23 was expected to be between £630m and £690m.

It made underlying profit before tax of £730m in the year to March 5, 2022, benefiting from lower Covid-19 costs, while analysts on average had expected £703m for 2022-23.

"The year ahead will be impacted by significant external pressures and uncertainties, including higher operating cost inflation and cost of living pressures impacting customers' disposable incomes," chief executive Simon Roberts said.

Shares fell 3.7% in early trade, underperforming the wider market, and adding to a fall of 13% so far this year.

Already this month, Tesco, the UK's fourth biggest supermarket Morrisons and seventh biggest the Co-operative Group have all warned on the outlook as a cost of living crisis and supply disruption due to the war in Ukraine weigh on the grocery sector.

Surging prices are causing the biggest squeeze on UK household incomes since at least the 1950s and consumer confidence is at near record lows.

Analysts see Sainsbury's as more challenged than other supermarket groups because of its ownership of the Argos general merchandise business - a sub-sector more exposed to pressure on consumers' disposable income.

Sainsbury's revenue rose 2.9% to £29.9 billion in 2021-22. Like-for-like sales, excluding fuel, fell 2.3%. They fell 5.6% in the fourth quarter, having fallen 4.5% in the third quarter.

General merchandise sales slumped 21.1% in the fourth quarter, having fallen 16% in the third.

Britain's inflation rate hit a 30-year high of 7% in March and is expected to peak at nearly 9% later this year. Food inflation hit 5.9% in April, according to industry data.

Sainsbury's said it continued "to inflate behind competitors on the products customers buy most often," and last week lowered prices across 150 of its highest volume fresh products.

On Monday, both Asda and Morrisons said they were cutting prices on essential items.

Sainsbury's is paying a full year dividend of 13.1 pence, up 24% and has committed to increase its dividend payout ratio to around 60%.