J Sainsbury has, in a statement forced by reports of a worsening performance, admitted that its half-year earnings will come in, at best, at 43 per cent of those achieved a year before.

The supermarket chain has said that it will announce underlying pre-tax profits of between £125 million and £135 million for the six months to last Saturday. The figure compares with the £313 million reported a year ago and falls below analysts' forecasts, even after a recent round of reductions.

Andrew Fowler, the Merrill Lynch analyst, on Friday reduced to £150 million from £177 million his estimate of Sainsbury's profits in a client note, entitled The First Cut Wasn't The Deepest, that sparked City outrage and a Financial Services Authority review.

Mr Fowler claimed that the cut, the second in five days, had followed a conversation with a Sainsbury investor relations officer who had "helpfully pointed out" that his previous guidance was too high. The claim raised concerns that Sainsbury had selectively briefed an analyst, in breach of City guidelines, and should instead have issued a profits warning.

The retailer has also been widely reported as poised, at an investors' briefing on October 19, to announce a dividend cut. Some reports say that the payout could be halved to save cash for reinvesting in price cuts and product quality.

Today's statement made no mention of dividends.

The briefing added, however, that a strategic review into the retailer had yet to be completed and would allow Sainsbury, on October 19, to reveal full-year profits guidance.

Analysts this morning further cut estimates for the retailers' annual earnings, with Richard Ratner, at Seymour Pierce, forecasting a figure of between £240 million and £250 million. Last year, Sainsbury achieved annual profits of £675 million.

"They are massively uncompetitive," Mr Ratner said.

"They’ve got their non-food offering all wrong."

Sainsbury shares stood 2p lower at 250p in afternoon trade.

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