Sainsbury beats profit forecasts

He said customers and staff wanted a "better, brighter, sharper Sainsbury's". To achieve this, the food retailer would improve the quality of 3,000 own-brand products over the next 12 to 18 months, cut prices by £150m, invest in its clothing and homewares and improve store layouts. Sainsbury's will also look at ways to sweat its existing assets - many of its stores have too much capacity - such as through third-party concessions. The investment will be paid for by cutting capital spending, slashing costs by £500m over the next three years and fixing dividend cover at two times underlying earnings. This last point implies a full-year dividend of 13.5p - down from 17.3p last year.

Store expansion will slow significantly and 40 outlets that were earmarked for development will be binned. The cost of getting out of these development contracts, together with a decision to impair a number of unprofitable stores, resulted in a one-off charge of £628m. Together with other costs, the total exceptional charge for the half-year was £665m, which explains the reported first-half loss.

Strip these one-off costs out and underlying pre-tax profit fell 6 per cent to £375m, beating consensus forecasts of £350m and serving up the best outcome among the listed grocery retailers. Like-for-like sales, excluding fuel, fell 2.1 per cent, and the underlying retail operating margin dipped 37 basis points to 3.1 per cent. Mr Coupe said profitability in the second half would be lower, and that consensus pre-tax profit forecasts of £677m for the full year - which imply EPS of about 28p - "may trickle down a bit".

Asked whether Sainsbury's executives were tightening their belts, Mr Coupe said the company was "frugal" and that he didn't have a car or driver - let alone a private jet.