Sainsbury’s first-half profit falls 10% on wage hikes and price war

British supermarket Sainsbury’s warned that higher staff wages and its price battle with rivals would mean a tougher end to the year after first-half profit fell by 10 per cent.

Sainsbury's is a distant second behind market leader Tesco in a sector which has been shaken by growing competition from German discounters Aldi and Lidl.

Seeking to expand further beyond food and household staples, it bought Home Retail, owner of the Argos chain for £1.1 billion in September.

Some investors have expressed concern the Argos takeover unwisely increases Sainsbury's exposure to higher import costs due to the weaker pound but chief executive Mike Coupe said he was "more confident than ever" about the acquisition's prospects.

However, conditions in the core supermarket business remain difficult.

Sainsbury’s said its full-year underlying profit expectation for the enlarged group remains in line with the market consensus of £573 million. It made an underlying pretax profit of £277 million for the 28 weeks to September 24th, down from £308 million in the same period last year, hurt by a 1 per cent fall in underlying sales that partly reflected its own price cuts. – (Reuters)