Sainsbury’s and Argos store shake-up in £500m cost-cutting plan

Sainsbury’s is also following rival Tesco Bank in stopping new mortgage lending amid tough competition and weak rates in the sector.

The update was issued as the group announced an improved 0.2% fall in like-for-like sales over the 12 weeks to 21 September – its second quarter. It pointed to “improved growth momentum” with total retail sales rising 0.1% on the same period last year – driven by grocery and clothing.

The company maintained its full-year outlook despite saying underlying profit before tax in its first half was expected to come in £50m lower on a year ago.

It blamed “the combined impacts of the phasing of cost savings, unseasonal weather against a strong comparative period last year and higher marketing costs”. Shares were 1.6% higher by the close of trading on the FTSE 100 as investors welcomed the pick-up in trading and cost-cutting plan.

Chief executive Mike Coupe had been accused, in some quarters, of taking his eye off the ball during a period of turbulent trading as he pursued a £13bn merger with Asda that was eventually blocked by the competition authorities.

He told investors on Wednesday: “Sales momentum was stronger in all areas and we further improved our performance relative to our competitors, particularly in grocery.

“We have focused on reducing prices on every day food and grocery products and expanding our range of value brands, which have been very popular with customers. “At the same time, we are investing significantly in our supermarkets, driving consistent improvements to service and availability.”