Sainsbury’s cuts dividend as first-half profits slide

Sainsbury's boss Mike Coupe said the retail landscape remains 'challenging'

However, despite an 18 per cent slide in underlying pre-tax profits to £308 million, as Sainsbury’s paid its staff the living wage and spent £150m on price promotions, the sales performance compared well with others in food retailing’s Big Four.

Over the summer, Asda revealed its worst quarterly sales figures in more than 50 years, while Morrisons saw like-for-like sales fall by 2.6 per cent in the 13 weeks to 1 November.

Sainsbury’s said the market remained “particularly challenging”, and that its UK market share declined 17 basis points to 16.5 per cent, “driven in particular by the growth of the discounters”. The group’s Scottish market share is 8 per cent, lower than that of Tesco, Asda and Morrisons.

Sainsbury’s chief executive Mike Coupe said the price promotions had led to a 3 per cent growth in transactions in its stores and 1 per cent volume growth.

In addition, he said that cost-savings of £115m had been achieved in the six months to  26 September, the group was on track to deliver £500m of savings over the next three years, and the pension deficit had reduced by £178m to £473m since last March.

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.”

John Ibbotson, director of retail consultancy Retail Vision, said the performance showed that Sainsbury’s, in the teeth of the competition from discounters Aldi and Lidl, was the “least struggling of the Big Four”.

He said: “Sales and profits are down, but volumes are up, showing that Sainsbury’s is adapting to the ‘new normal’ better than most.”

The group’s clothing business, which it wants to expand, had a good trading period, with sales up nearly 10 per cent. This included the successful launch of the Tu brand online.

Sales at the group’s Sainsbury Local convenience stores rose nearly 11 per cent. The retailer said it was also trialling new formats in six supermarkets and its micro convenience stores to address changing customer shopping habits.

Sainsbury’s reduced its interim dividend payout to 4p, against 5p last time.