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The BBC's Peter Morgan
"Sainsbury's is losing a fierce price war but isn't suffering alone"
 real 28k

Tuesday, 23 November, 1999, 07:32 GMT
Sainsbury profits slump
Sainsbury store Sainsbury's needs to attract customers back to its stores

Sainsbury's has reported a 17.6% fall in profits as the price war cuts its profit margins.

But it is still planning to create about 20,000 jobs.

The supermarket company said the cost of price campaigns had sent profits before tax and exceptional items down to 352m in the six months to October, from 461m last year.

Sainsbury own label Peas are one of the battle lines in supermarket wars
Prices across the UK supermarket sector have been falling in recent months as competition heats up between the four biggest groups.

The spur for the latest round of discounting was the purchase of the third biggest chain, Asda, earlier this year by US discount giant WalMart.

Even before it had time to implement its price cutting strategy, its rivals launched a pre-emptive series of price promotions of their own.

Sainsbury's, formerly the market leader but now in second place, is planning a big expansion of its Local stores over the next three to four years, creating in the order of 10,000 jobs.

"We've made a good start", said Chief Executive Dino Adriano.

" There's a few stores on the ground at the present time. We have a programme to open 35 next year and our plan, at the present time, is to open 200 over the next three years.

"We think this is a very appropriate new format to add to our growing portfolio," he said.

In the core Sainsbury's supermarkets business, Mr Adriano said the company would open about 18-20 stores next year, also creating about 10,000 jobs.

Tesco and Asda have been winning market share from Sainsbury's in the so-called store wars, which have seen heavy discounting of food prices.

Mr Adriano has been criticised over the company's ailing fortunes. It was recently rumoured he would leave the group.

But last month, Mr Adriano delegated hands-on responsibility of the supermarket chain to his deputy, David Bremner, to allow himself to concentrate on strategy.

Sainsbury's woes have also seen it become the target of takeover speculation.

Companies such as Knutsford, the vehicle backed by former Asda chairman Archie Norman, or a European player, are rumoured to be keeping an eye on the group.

Total sales for the group, including its Homebase DIY stores and its US-based Shaws business, increased to 9.1bn from 8.7bn. But sales from its UK supermarkets were under pressure from "an increasingly competitive market" and rose by just 0.7%.

On a like-for-like basis - stripping out sales made in new stores - the picture was more gloomy with a decline of 1.3%.

Sainsbury's shares have fallen from 481.75p at the beginning of the year to 319.5p at the close of trading on Monday. The reaction to the results was muted, with the stock rising 2p in early trading on Tuesday
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See also:
05 Oct 99 |  Your Money
Q&A: Supermarket price wars
08 Oct 99 |  The Company File
Fresh chief for Sainsbury's
11 Nov 99 |  The Company File
Somerfield slims down
21 Sep 99 |  The Company File
Tesco surges ahead

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