LONDON (AFP) - J Sainsbury said it would halve its dividend and cut costs to fund price reductions and a sprucing up of its image in an effort to reverse flagging fortunes.
Sainsbury, which last week issued its third profit alert this year, is to take 550 million pounds (792 million euros, 990 million dollars) of one-off charges this financial year after an ill-fated decision to sink three billion pounds into supply-chain and information technology improvements.
Having made 675 million pounds in the year to March 2004, Sainsbury reiterated first-half underlying pretax profit was expected to be between 125 and 135 million pounds. There was unlikely to be any improvement in the second half, it added.
Following a lengthy business review instigated by chief executive Justin King, the grocer said it will invest up to 400 million pounds over the next three years in improving its "customer offer", including lower prices.
"We're going to deliver better prices than we've been delivering in the recent past but we're also going to really up the bench in terms of quality," King told reporters on a conference call.
The aim is to help arrest a decade-long decline in market share during which time the former market leader has been pushed into third place by Tesco and Wal-Mart Stores Inc's unit Asda.
Sainsbury's share of Britain's 100-billion-pound annual grocery market has dwindled by 0.6 percentage points to 15.3 percent over the past year alone.
At the same time its stock price has fallen eight percent.
Its fortunes are in stark contrast to market leader Tesco, which last month reported record first-half profit, and whose shares have gained 21 percent in the past 12 months.
Sainsbury, which has replaced four executives this year, said that about 750 head-office jobs are to go within the next six months, though it will hire an extra 3,000 workers for its shop floors.
It will also close 12 of its 260 so-called convenience outlets which have been performing less well.
In total it aims to strip 400 million pounds from operating costs by the end of the 2007/2008 financial year, but hopes the measures will help it grow sales by 2.5 billion pounds over the same period.