Sainsbury's Profits Down 18% Amid Price War

Sainsbury's plans to close the gap on discount rivals further despite the fierce supermarket price war taking its toll on its bottom line as half-year profits dropped.

The grocer said underlying pre-tax profit for the 28 weeks to September 26 fell 18% to £308m. It was ahead of market expectations but shares fell 4% as Sainsbury's pared back its interim dividend.

Sainsbury's same-store sales were 1.6% lower over the period. It said a price-cutting strategy launched last year means volumes have grown, with more items sold but at lower prices.

Chief executive Mike Coupe said: "I am confident we are making progress and we are looking forward to a successful Christmas."

But he suggested more price cuts might be needed.

"We've closed the gap reasonably significantly to the discounters but we still think there's room and opportunities for targeted investment in certain categories," he told reporters.

Sainsbury's has already reduced prices on 1,500 products as part of a £150m strategy launched last year and said it remained "as competitive as it has ever been" against rivals.

Supermarkets are locked in a price war as they vie for market share that is being gnawed away by discount rivals Aldi and Lidl.

The group has been seen as weathering the storm better than some of its rivals and recent sales declines have not been as bad as predicted by markets. But its full year profit is still expected to be sharply down on the prior year.