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| Sainsbury's profits slide 18% amid supermarket price war | Sainsbury's profits slide 18% amid supermarket price war |
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| Sainsbury’s has reported an 18% slide in profits, hit by lower sales and a fierce supermarket price war. | Sainsbury’s has reported an 18% slide in profits, hit by lower sales and a fierce supermarket price war. |
| The retailer said it was expecting a “more buoyant” Christmas as it posted a profit before tax and one-off items of £308m for the 28 weeks to 26 September. The figure is Sainsbury’s lowest first-half profit since 2010 and down from £375m reported a year earlier. | The retailer said it was expecting a “more buoyant” Christmas as it posted a profit before tax and one-off items of £308m for the 28 weeks to 26 September. The figure is Sainsbury’s lowest first-half profit since 2010 and down from £375m reported a year earlier. |
| However, the performance was better than expected by City analysts, who had been forecasting a far larger fall in profits, to between £284-293m. | However, the performance was better than expected by City analysts, who had been forecasting a far larger fall in profits, to between £284-293m. |
| Sales at stores open for at least a year fell 1.6%, excluding petrol, as food sales fell nearly 1% and the retailer cut prices by nearly 2.5%. | |
| Related: Sainsbury's chief attacks proposal to change Sunday trading laws | Related: Sainsbury's chief attacks proposal to change Sunday trading laws |
| Mike Coupe, the supermarket’s chief executive, said the strategy he set out a year ago was working. | Mike Coupe, the supermarket’s chief executive, said the strategy he set out a year ago was working. |
| Sainsbury’s has been cutting prices and improving product quality and customer service to stop customers defecting to the discounters. It has reduced the amount of sugar in its own-brand yoghurts and juices and launched a £10m, five-year project called Waste Less, Save More, to tackle food waste. | Sainsbury’s has been cutting prices and improving product quality and customer service to stop customers defecting to the discounters. It has reduced the amount of sugar in its own-brand yoghurts and juices and launched a £10m, five-year project called Waste Less, Save More, to tackle food waste. |
| He said Sainsbury’s would invest more in lowering prices as he expected deflation in the market to continue into summer 2016. “We have closed the gap with the discounters but we think there is room and opportunity for targeted investment in certain categories,” he said. | He said Sainsbury’s would invest more in lowering prices as he expected deflation in the market to continue into summer 2016. “We have closed the gap with the discounters but we think there is room and opportunity for targeted investment in certain categories,” he said. |
| Coupe said those price cuts would not be of the same scale as the £150m of adjustments made just over a year ago, which helped Sainsbury’s move 10% closer to the discounters in price. Analysts said Sainsbury’s had cut prices by £80m in the past six months and is expected to trim them by another £30m in the next six months. | Coupe said those price cuts would not be of the same scale as the £150m of adjustments made just over a year ago, which helped Sainsbury’s move 10% closer to the discounters in price. Analysts said Sainsbury’s had cut prices by £80m in the past six months and is expected to trim them by another £30m in the next six months. |
| Asked if profits would continue to fall as Sainsbury’s is forced to cut prices, its finance director, John Rogers, said it was too early to say. “We are encouraged by the momentum in the business but the reality is that the market remains uncertain and the loss of market share to the discounters from supermarkets overall is still taking place,” he said. | Asked if profits would continue to fall as Sainsbury’s is forced to cut prices, its finance director, John Rogers, said it was too early to say. “We are encouraged by the momentum in the business but the reality is that the market remains uncertain and the loss of market share to the discounters from supermarkets overall is still taking place,” he said. |
| Sainsbury’s said the number of transactions at its tills and the volume of products sold had both risen in the half year as shoppers welcomed the lower prices, The group shifted 2% more of its top-of-the-range Taste the Difference products while clothing sales were up almost 10%, as it launched its Tu range online. | |
| The retailer said the market remained challenging, blaming food deflation and tough competition from discounters such as Aldi and Lidl, which has reduced its market share to 16.5%. | The retailer said the market remained challenging, blaming food deflation and tough competition from discounters such as Aldi and Lidl, which has reduced its market share to 16.5%. |
| The latest profit beat came after Sainsbury’s a previous upgrade in September when the company said that annual profits would be higher than expected, because sales at its big stores had stabilised and it reduced the cost of food thrown away. | The latest profit beat came after Sainsbury’s a previous upgrade in September when the company said that annual profits would be higher than expected, because sales at its big stores had stabilised and it reduced the cost of food thrown away. |
| On Wednesday, Sainsbury’s said its cost savings programme was ahead of plan, with savings of around £225m expected by the end of this financial year, leaving it on track to deliver £500m cost savings over the next three years. | On Wednesday, Sainsbury’s said its cost savings programme was ahead of plan, with savings of around £225m expected by the end of this financial year, leaving it on track to deliver £500m cost savings over the next three years. |
| Coupe said: “I am confident we are making progress and we are looking forward to a successful Christmas.” | Coupe said: “I am confident we are making progress and we are looking forward to a successful Christmas.” |
| He said shoppers had an average £20 a week more to spend this Christmas than last year and that suggested trading might be more buoyant. | He said shoppers had an average £20 a week more to spend this Christmas than last year and that suggested trading might be more buoyant. |
| Clive Black, a retail analyst at Shore Capital said: “Sainsbury’s has beaten our expectations, not only financially but in terms of capability and so resilience. The business is increasingly crafting its own identity again, somewhat differentiated as a mass market play by its values, choice of offer and the specification of its wares. | Clive Black, a retail analyst at Shore Capital said: “Sainsbury’s has beaten our expectations, not only financially but in terms of capability and so resilience. The business is increasingly crafting its own identity again, somewhat differentiated as a mass market play by its values, choice of offer and the specification of its wares. |
| “Whilst not immune to the growing presence of the [discounters] to date it has proved to be more capable in withstanding their advances than its value orientated peers.” | “Whilst not immune to the growing presence of the [discounters] to date it has proved to be more capable in withstanding their advances than its value orientated peers.” |