* Supermarket has reported three years of profit decline
* Analysts forecast fourth year of decline in 2017-18
* Chairman says erred over underfloor heating advice
By James Davey
LONDON, July 5 (Reuters) - Private shareholders in Sainsbury's berated the British supermarket group's board at its annual meeting on Wednesday, complaining about three years of falling profit and the prospect of a fourth in its current year.
Private investors own about 6 percent of Sainsbury's shares, excluding holdings by Sainsbury family members, and they were out in force at the annual meeting in central London.
Sainsbury's is not alone in facing tough trading conditions. British market leader Tesco, third biggest player Asda , and fourth biggest Morrisons, are all in turnaround mode after a difficult few years.
While the market share of Sainsbury's, the second largest UK food retailer, has remained broadly stable over the last five years, its profits have fallen for three years in a row.
On Tuesday it said in a trading update it was comfortable with analysts' average pretax profit forecast for 2017-18 of 572 million pounds ($739 million). Such an outcome would represent a fourth year of profit decline despite last year's purchase of Argos-owner Home Retail.
One shareholder at the meeting, a Mr Muriel, said the decline in Sainsbury's key performance indicators (KPIs) over the last five years was "quite alarming in every way."
"Can you please give us some indication that you think you've reached the bottom, that perhaps with any luck at all this coming year we might see some improvement in these KPIs," he said. KPIs include profit, earnings per share and operating margin.
Another investor, John Farmer, a regular dissenting shareholder on the UK Annual General Meeting circuit, also hit out at Sainsbury's falling profit, lower dividend, its strategy and board remuneration, which he called "a shambles".
Chairman David Tyler responded by saying that while the board was disappointed by the reduction in earnings it was confident Sainsbury's strategy of building a distinctive food offer, growing its general merchandise, clothing and banking businesses, and bearing down on costs, would deliver.
"Argos has started in a wonderful way, outperforming our expectations, our clothing business is scoring goal after goal ... our online business grows very rapidly and we continue to make a lot of progress in the bank," he said, pointing to Tuesday's better-than-expected quarterly trading update.
"Our objective is to improve on last year's profitability but I'm sure you recognise the world has changed over the last five years - it's very competitive and we have done rather better than a number of our competitors."
Tyler also told shareholders he had erred in taking advice from an environmental expert within Sainsbury's when installing underfloor heating at his home in 2013.
"I fully accept that I made a mistake in doing that," he said.
"I volunteered this matter to the board, they investigated and they concluded that my failure to comply with company policy was unintentional, that I didn't act dishonestly and I made no financial gain." ($1 = 0.7742 pounds) (Editing by Jane Merriman)