French retailer Carrefour has seen a sharp fall in its profits after it cut prices in a bid to attract customers.
Carrefour believes its strategy of building sales growth will pay off
Its price-cutting moves in France led to a 7% decline in first-half profits to 687m euros (£470m; $850m).
Carrefour has found growth hard to come by in France and replaced its chief executive earlier this year in the hope of reinvigorating its business.
The firm said it was optimistic about growing sales in 2006 and increasing profitability at its non-French stores.
Carrefour's shares rose 3.5% in early trading as analysts said its performance was no worse than expected.
The world's second largest retailer with 11,000 stores, Carrefour has been struggling in recent times.
Carrefour is focusing on growing sales by making its prices more competitive and increasing store space.
In the short term, the strategy has hit profits in France, which declined nearly 15% in the first half of the year.
Sales in Carrefour's home market, which account for nearly 50% of its total turnover, slipped 1% to 17bn euros.
However, the company made progress in the rest of Europe, where operating profits rose 15.5%, and also enjoyed gains in Asia.
Carrefour said it was encouraged by an increase in transactions at its French stores and by a rise in market share in food sales.
However, it stressed that there was still room for improvement.
"We remain prudent," the company said in a statement.
"Although we are pleased with our progress so far this year, there is still a lot to do."