HOPES that the retail sector has defied the worst fears of investors will be tested this week with updates from Marks & Spencer, Tesco and Debenhams.

Winners and losers in a vicious supermarket price war launched prior to Christmas will be revealed when three of the biggest players update the market.

Battle for sales gathered pace after Tesco introduced its Big Price Drop, Asda guaranteed to be 10% cheaper than rivals and Sainsbury’s launched a price-matching scheme. Increased competition from discounters Aldi and Lidl also upped the ante.

On top of this, supermarkets have been slashing prices in a frenzy of promotions ahead of the crucial Christmas trading period, which is likely to have hurt profits.

The biggest supermarket Tesco, which has 2,700 UK stores and will update on Thursday, recently reported falling sales for the fourth quarter in a row, despite its £500m price-cutting campaign. Its woes are expected to continue as rivals breathe down its neck by opening more stores and competing harder on price.

Matthew Truman, an analyst at JP Morgan Cazenove, forecast that Tesco’s underlying sales will fall 1.5% over the Christmas period, compared to a 0.9% fall in its previous quarter.

Sainsbury’s, which updates on Wednesday, has been fighting its corner by rolling out its Brand Match scheme, which pledges to match thousands of prices at rivals Tesco and Asda.

Initiatives such as Live Well for Less and its Feed your Family for £50 weekly meal planner have boosted its appeal.

Its recent performance has been strong, with sales up 1.9% in its most recent quarter, and the City expects it to reveal similar gains over Christmas. Unlike Tesco, its figure includes VAT.

Morrisons is expected to report sales have slowed as the price wars take their toll.

The grocer, which has some 450 stores in the UK, has fared better than its main supermarket rivals in recent months because it sells relatively small amounts of non-food items. The City expects like-for-like sales growth, excluding VAT and fuel of 1%, compared to 2.4% in the previous quarter.

On the high street, Mothercare’s sales misery is expected to have continued over Christmas as supermarkets and online competitors steal its business.