Sainsbury’s profits tumble by 29% as it keeps down prices to compete with Aldi and Lidl

Sainsbury’s profits have fallen as it kept prices low to compete with Aldi and Lidl.

The UK’s second-largest supermarket has plowed hundreds of millions of pounds to cut prices, despite rising staff, energy and product costs.

And because the group — which also owns catalog seller Argos — “consistently passed on less inflation” than rivals, it said it was forced to swallow some of the costs itself.

Profits in the six months to 17 September fell 29 per cent to £376 million – despite an overall revenue increase of 4.4 per cent to £16.4 billion, mainly thanks to the strong last three months.

Food sales increased 0.2 percent in the six-month period, including a 3.8 percent increase in the last three. But despite a strong increase in airfryer sales, as customers want to reduce their energy consumption, Argos sales fell by 6.1 percent.

As Sainsbury’s Christmas season enters, CEO Simon Roberts said “the great unknown” was how families will celebrate this year.

The company said households are more likely to shop to spread the cost of the holiday and turn down restaurants to eat at home.

Roberts said shoppers “watch every penny,” meaning Sainsbury’s made sure customers “have no reason to go anywhere else,” including German discounters Aldi and Lidl.

Shoppers have flocked to the discount stores to save money, with Aldi overtaking Morrisons in September to become the fourth largest supermarket.

But Roberts said Sainsbury’s has narrowed the price differential between itself and Aldi over the past year with schemes such as its price guarantee on 240 products. Russ Mold, AJ Bell’s financial analyst, said Sainsbury’s is doing a “good job” keeping prices in check.