Update: Sainsbury's share price has fallen six per cent so far today, after revealing a nearly 18 per cent fall in profit, despite slashing its interim dividend by a third.
Sainsbury's group sales were down two per cent to £13.6bn for the 28 weeks to 26 September, while retail sales were down 0.1 per cent excluding fuel. Like-for-likes dropped 1.6 per cent.
However, the supermarket is taking greater strain on its bottom line, which dropped to £308m from £345m last year. Underlying basic earnings per share fell 17.2 per cent to 12p.
Return on capital dropped from 11.1 per cent to 9.1 per cent.
As a result, the retailer has cut its interim dividend to 4p per share, down from 5p per share last year.
Sainsbury's share price rose on the open, but by mid-morning trading it had fallen, and was down 3.7 per cent at 11am. By 2:20pm, it was down six per cent.
Why it's interesting
The top line might appear worrying, but Sainsbury's profits have come in at less of a drop than the 24 per cent some analysts had suggested was coming.
Still, it shows the extent to which the price wars are putting pressure on the business, and in particular Mike Coupe who has had the invidious task of steering the good ship Sainsbury's after a decade of growth enjoyed under Justin King.
Coupe has ploughed £150m into the supermarket to help it tackle the threat posed by budget retailers Aldi and Lidl, but market share is still sliding.
The strategy, as with the rest of the Big Four, is now to adopt lower everyday prices rather than constant promotions, which Sainsbury's said has helped improve its forecasting "driving better availability and reducing waste".
One highlight was two per cent volume growth in the higher-end Taste the Difference range, which has also won awards. Clothing similarly was positive, up nearly 10 per cent for the period thanks to ongoing collaborations with Gok Wan.
Sainsbury's is now trialling new store formats in the hope that this will encourage more shoppers through its door.
What they said
Coupe said: “We are making good progress against the strategy we outlined last November. We are delivering volume and transaction growth as customers value our quality improvements and our clearer, simpler message of lower regular prices…
“The grocery retail marketplace remains challenging but Sainsbury’s is a great business, run by an experienced management team, supported by talented colleagues and strong values. I am confident we are making progress and we are looking forward to a successful Christmas, offering our customers fantastic products and great value."
Coupe says the company is on track to make £500m-worth of savings in three years, but the pressure is on for him to do that in an increasingly challenging environment.