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Evening Standard
Evening Standard
Simon English

Sainsbury's cuts prices and takes sales from Aldi and Lidl

Sainsbury today claimed it was grabbing market share from every competitor including the discount kings Aldi and Lidl for the first time as it put food “back at the heart of Sainsbury’s”.

More and more customers watching budgets want to dine at home, says chief executive Simon Roberts. “Customers are choosing to treat themselves to a night in. They want a Taste the Difference meal in front of Strictly,” he said.

In the half-year to September overall sales rose 2.9% to £18.8 billion. But notably, grocery sales are up 10.1% while clothing sales fell 8.4%.

Analysts say that is due to a damp summer that saw Sainsbury’s clothing range shunned.

Full-year profit should be between £670 million and £700 million – a boost to previous guidance.

But for the half-year profits fell 27% to £275 million, partly due to a one-off legal settlement in the previous year.

Roberts said: “We’ve never been more competitive on price and our focus on value, innovation and service is giving more customers more reasons to shop with us. We know people are still finding things tough and we’re working harder than ever to reduce our costs.”

Official figures show food inflation is down to 5.2% in October, the fifth month running where it declined.

Shoplifting remains a problem. Roberts said: “It is the number one issue; the safety of our people and our customers. There is a significant rise in retail crime. The first report I look at every morning is serious incidents from yesterday.”

The company doesn’t give figures on how much food is stolen each day and says it is hard to be exact, though internally it has a reasonable idea.

The rise in shoplifting has been put down to the cost of living crisis and other societal problems such as drug abuse.

Sainsbury shares rose 10p to 272p as the City noted that debts are down by £700 million to £5.6 billion while the dividend is maintained at 3.9p.

Richard Hunter at interactive investor said: “Keeping shopping prices low has had a positive impact on the group’s market share, but of course this comes at a costto Sainsbury itself. Since March, for example, the company has invested £118 million on price reductions. The ferocity of competition, particularly in thesupermarket arena, is well established and shows little sign of abating, such that the group will need to keep a constant lid on prices in order to remain in the mix.”

Rivals are likely to strike back as the hyper-competitive Christmas season begins.

Aldi and Lidl have transformed the grocery market in the UK putting intense pressure on the established players such as Tesco and Asda.

The squeeze on families finances has seen them scrutinise shop prices more closely than ever.

Charlie Huggins, manager of the Quality Shares Portfolio at Wealth Club, said:

“Sainsbury's has worked hard to lower prices in the face of intense competition. The launch of Nectar prices, where Nectar card holders save money on everyday itemsseems to have been well received and has helped the group to hold its own against Tesco and the German discounters. Sainsbury's cannot afford to rest on its laurels. The supermarket sector remains intensely competitive and the UK consumer is far from being out of the woods.”

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