Safeway operating profits for the year ending March 29 fell from £416.5 million to £347m and pre-tax profits dropped from £354.8m to £270.3m.

The supermarket admitted the bid battle had cost almost £20m in higher costs to suppliers. Of this figure £17m was to advisers and £5.5million in bonuses to retain key executives.

Safeway's chief executive, Carlos Criado-Perez insisted that the core business was in good shape, with underlying sales growth continuing. He said: 'Under normal circumstances, if we had been able to invest more then we would have seen real growth.' Mr Criado-Perez said he did not expect an outcome on the current bidding war until October at the earliest and was committed to staying until any deal was concluded.

However, reports claim that the group will have to invest a further £6m in loyalty bonuses in the coming year to prevent key staff quitting in the coming financial year.