Sainsbury's has thrown down the gauntlet to larger rival Tesco, taking a hit on profits and the dividend to fund lower prices for customers. As Hayley Platt reports it's the latest escalation of the British supermarket battle.
They've been UK rivals for years but Sainsbury's has now thrown down the gauntlet to Britain's number one retailer Tesco. It plans to slash expenditure to deliver cost savings of 500 million pounds over the next three years - part of that will be used to pay for price cuts. It's the first big strategy announcement from new boss Mike Coupe, who took over in July. Sainsbury's Chief Financial Officer, John Rogers, told Reuters there would be other changes too. SOUNDBITE: John Rogers, CFO Sainsbury, saying (English): "What cutting those costs allows us to do is to invest back into our estate, to change the lay out of our stores, to change the format, to change the ranges, to reflect the changing ways that customers are shopping in our estate." Sainsbury's pre-tax profit of 373 million pounds for the six months to September 27 was comfortably ahead of expectations. But it was down from the same time last year, suggesting the sector's one-time star performer is also finding the market tough. The discounters Aldi and Lidl are hurting all the big players And Sainsbury's answer to that is to join them. It's teamed up with Danish discounter Netto, opening 15 budget stores. IG's Alastair McCaig says it's a smart move. SOUNDBITE: Alastair McCaig, market analyst, IG, saying (English): "The smaller more local stores seem to be doing the best business and a diversification away as well from some of the core retailing and some of the ancillary and clothing and the likes, is maybe going to hang over them for a little while to come but yes agreements with Netto could well pan out to be a step in the right direction." There won't be as many new Sainsbury's stores - they're being cut back too So is profitability - the second half of the year will be lower than the first. The group's full-year dividend will also take a hit.