Sainsbury’s has announced a decline in profits as the company invests in lower prices amidst record-high inflation.

The retailer, which is the second largest supermarket the UK with a 14.7 per cent share of the market, recorded pre-tax profits of £340 million in its half year report – down by eight per cent.

But the business said that it is halfway through a £1.3 billion cost saving programme and is confident in its "competitive position" in the market in the face of macro challenges and operating cost inflation.

The company attributed lower retail operating profit, which declined nine per cent, to reduced grocery and general merchandise volumes post-pandemic and higher operating costs, partially offset by a higher fuel contribution.

Over the seven-week period to 17 September, the company saw general sales down by six per cent.

However in the second quarter sales were up 1.2 per cent, driven by improved availability, summer weather and market share gains. Growth was largely driven by consumer electronics and seasonal products.

"Customers are watching every penny and every pound and we know that they are relying on us to keep food prices as low as we can,” said Simon Roberts, chief executive, Sainsbury’s.

The chief exec said that the company will have invested more than £500 million by March 2023 in keeping prices lower by cutting its costs at "a faster rate" than other UK supermarkets, suggesting that Sainsbury's has "more firepower" to tackle inflation.

"Over the past year and a half we have consistently passed on less price inflation than our competitors and I am confident we have never been better value," added Roberts.

The financial results come months after Sainsbury's revealed that sales had dropped by four per cent in the first quarter of the year.

During the 16 weeks to 25 June 2022, clothing sales were down by 10 per cent, while general merchandising at Argos also declined by just over 10 per cent.

Grocery sales at the supermarket chain were down by 2.4 per cent compared to elevated pandemic-driven levels but 8.7 per cent ahead of pre-covid levels.
But the company warned that underlying pre-tax profits will be between £630 million and £690 million this year.

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