LONDON (Reuters) – British grocer Sainsbury’s said on Wednesday it would cut costs and spending and accept lower profitability in order to bring down prices for customers to ward off rivals in an increasingly bitter British supermarket battle.
With Sainsbury’s share price down a third in the last year, Mike Coupe, who took over in July, has been under pressure to come up with a strategy to avoid the even deeper problems experienced by market leader Tesco and smaller rival Morrisons.
Sainsbury’s said it would invest an additional 150 million pounds ($239 million) in lower prices over the next 12 months, which means its profitability will be lower in the second half than the first half. It also expects its full-year dividend to fall.
The firm said it would open 500,000 square feet of space in each of the next two years, followed by 350,000 square feet in 2017-18 – down from the 750,000 square feet it expects to open in 2014-15.
The group also plans to increase its non-food range, offering more clothing, home wares and seasonal products, both to diversify its appeal and to fill excess store space that has developed as customers increasingly shop in smaller, local stores.