Sainsbury's profits dive as rival supermarkets sprint ahead in prolonged price war

Sainsbury’s boss Mike Coupe warned the supermarket price war is set to drag on for at least another year as the company watched its profits crash by 18%.

Despite this and a cut to its dividend from 5p to 4p, results from the UK’s third-biggest supermarket were better than the City expected.

But Coupe cautioned: “We’ve seen the most-volatile year in retailing and we see it as remaining challenging for the next 12 to 16 months.”

He added that prices would remain low due to a fall in global commodity prices and the continuing rise of the discounters, leaving Sainsbury’s and others forced to cut prices.

Coupe’s warning comes as the supermarket revealed sales during the six months to September 26 dropped 2% to £12.4 billion, with underlying, pre-tax profits down by 17.9% to £308 million. Shares rose 10.2p to 262.4p.

Sales on a like-for-like basis fell 1.6%, dragged down by a 2% decline in sales at bigger outlets, although convenience-store sales rose 11% as bosses opened a new site every week.

Despite the huge rise in convenience-store numbers, Coupe insisted large supermarkets had a place in retailing.

He said: “Even on the most-pessimistic views on the market, more than half of grocery shopping in the next five years will be done at superstores, but not that long ago it was at 70% so we need to reinvent the superstore.”

Coupe admitted Sainsbury’s, which sponsored July’s Anniversary Games at the Olympic Stadium (pictured), still had too much underused space in stores, and is keen to keep rolling out more non-food offers such as its TU clothing range. He also said there is potential for more third parties to follow in the footsteps of Argos, Timpsons and Jessops, which have concessions in its supermarkets.

The results show Sainsbury’s is taking customers from its traditional Big Four rivals, Tesco, Asda and Morrisons, but Coupe said it is still losing shoppers to discount competitors Aldi and Lidl.