Sainsbury's has forecast that shop profits will flatline or fall in the coming year as the supermarket sector prepares for a possible price war.
The retailer said it expects income to dip to £1bn as it continues to invest in lowering grocery prices.
Last week, Tesco admitted that it could take a significant hit if it is forced to cut prices after Asda – now under the leadership of industry veteran Allan Leighton – announced it would reduce grocery costs to boost the struggling store.
A race to lower prices could help households who are still struggling with the cost of living at a time when bills, such as energy and water, are increasing.
"We're in the strongest position we've ever been [on price competition] and we intend to stay there," said Sainsbury's chief executive Simon Roberts.
The company expects the impact of lowering prices to be relatively small compared to a potential £400m hit announced by Tesco.
Sainsbury's predicts underlying retail profit will tick down by around £36m over the year.
This, said Bernstein analyst William Woods, gives the supermarket "wiggle room" to fight with Tesco and Asda if needed.
While supermarkets are always competing with each other over price, the threat of a more intensive clash arose in March when Mr Leighton said Asda would take a hit to its profits in order to reduce prices, rebuild market share and win back customers.
At the time, the likes of Tesco and Sainsbury's saw their share prices plunge on speculation they would be forced to fund millions of pounds worth in price cuts to compete with Asda.
Mr Leighton was Asda's chief executive between 1996 and 2001 and returned last year as executive chairman to turn the business around after a period of falling sales and under-investment.
