Sainsbury's is taking its wars with Asda, Tesco and Morrisons to new levels with a £150million price chop campaign
Sainsbury's is ploughing £150million into price cuts over the next year after plunging into the red.
The supermarket giant is set to fuel an industry price war after it yesterday announced plans to reduce the cost of everyday essentials.
The amount earmarked for discounts is less than some of rivals have unleashed but bosses hinted at more to come.
It plans to part fund the price cuts by scaling back store openings and its dividend for shareholders.
The move came as Sainsbury’s posted a £290million loss for the six months to the end of September.
The main reason for the sharp drop, from a £433m profit the same time last year, was due to slashing the value of its stores.
Excluding this and other one-offs, profits fell 6.3% to £375m.
Sainsburys’s is not alone is having been hit by a shake-up in the grocery sector which has also left rivals Tesco, Morrisons and to a lesser extent Asda reeling.
The number of families doing a weekly shop at a superstore has fallen, with more people switching to booming discount chains.
Budget grocer Aldi this week announced a target to create 35,000 jobs over the next eight years with plans to nearly double its UK stores.
Sainsbury’s estimates discount grocers will grow their market share from around 8% now to around 15% over time.
The firm has tried to fight back by doing a deal to help bring discount chain Netto back to the UK.
At the same time, cut throat competition and falling commodity costs mean shoppers are benefiting from price deflation - where food costs less than a year ago.
Sainsbury’s chief executive Mike Coupe said the grocery sector was going through the biggest change he can remember.
Commenting on the shake-up plans, he said: “Customers want a better Sainsbury’s. They want evolution not revolution.”
Struggling Tesco is expected to use part of war chest it is building up to slash prices.
Asked how it would response, Mr Coupe said: “We absolutely have made sure that we’ve got the cash resources to deal with whatever scenarios that we can envisage in the market place.
“We are very aware that there is somebody (Tesco) limbering-up in the changing rooms.”
Sainsbury’s admitted it had too much space in around 25% of its stores - 150 outlets - which it would look to fill in other ways.
Plans include stocking more clothing and homewares, sub-letting the space to other retailers or potentially opening Netto outlets in its superstores.
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