Sainsbury's posts first loss in a decade

* Posts first statutory pretax loss since 2005

* Also posts first underlying profit fall in a decade

* CEO sees no let up in tough trading conditions

* Shares (Berlin: DI6.BE - news) fall 4 pct (Adds more comments from CEO, updates shares)

By James Davey

LONDON, May 6 (Reuters) - British supermarket Sainsbury's posted its first annual loss in a decade, hurt by property writedowns, deflation and an industry price war, and warned investors not to expect trading conditions to improve any time soon.

Chief Executive Mike Coupe said on Wednesday he expected deflation to persist in the grocery market for the rest of 2015 and possibly into 2016, and did not rule out further price cuts beyond the 150 million pounds ($227 million) net investment already committed to this financial year.

"The big unknown is the extent to which our competitors may or may not choose to invest in price ... We will match them toe-to-toe," he told reporters.

Shares in Sainsbury's, already down 14 percent over the last year, fell a further 4 percent.

The firm, along with rivals Tesco (Xetra: 852647 - news) , Asda and Morrisons, is grappling with record food price deflation and cutting prices 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.

"The underlying pressures of the industry will remain from a deflation point of view and therefore you would expect that the underlying sales growth of the industry will be negative for the foreseeable future," said Coupe.

Industry data on Wednesday showed sales fell at all of Britain's big four grocers in the last three months.

Shore Capital analyst Clive Black said Sainsbury's may not have reached the end of its profit downgrade cycle.

"In particular, we are concerned that a revitalising Tesco may hit Sainsbury's trading patterns," he said, referring to signs of turnaround at Britain's biggest retailer.

Sainsbury's made an underlying pretax profit of 681 million pounds in the year to March 14, ahead of analysts' average forecast of 659 million but down 14.7 percent from the 798 million made the year before.

After booking 753 million pounds of exceptional charges announced alongside half-year results in November, mainly due to a write down of the value of its property to reflect the deterioration in market conditions, Sainsbury's posted a statutory pretax loss of 72 million pounds.

Last month, property write downs were a major factor in Tesco reporting an annual loss of 6.4 billion pounds, one of the biggest in British corporate history.

Sainsbury's sales fell 0.9 percent to 26.1 billion pounds, while sales at stores open over a year, excluding fuel, fell 1.9 percent. However, the firm noted encouraging signs of volume and transaction growth in the fourth quarter as its price cuts kicked in.

Sainsbury's set out a plan in November to reduce capital expenditure, costs and dividends to finance lower prices.

Coupe reckons these, simpler promotions and a focus on product quality and innovation, as well as expansion of non-food, online and convenience businesses, can combat the threat from discounters and Tesco.

"We have the financial resources to exercise that plan and if anything we have more confidence today that that's the case than six months ago," he said.

Sainsbury's is paying a full-year dividend of 13.2 pence per share, down 23.7 percent, in line with previous guidance.

($1 = 0.6594 pounds) (Editing by Neil Maidment and Mark Potter)