SAINSBURY'S is confronting the crisis facing the big supermarkets in the UK's shopping revolution by abandoning new developments and admitting one in four of its stores is failing.

While German discounter Aldi recently announced plans for 35,000 new jobs in the UK, 145-year-old Sainsbury's said it would cut costs by £500 million over the next three years.

And that means jobs could be at risk.

It will invest in only eight new and four redeveloped stores, while pulling the plug on 40 developments and writing down the value of its land pipeline by £287m.

Most worryingly for ­Sainsbury's and its bigger rival Tesco, the retailer took a further £341m writedown on the value of currently unprofitable stores. It said only 75 per cent of its supermarkets were in the "right locations and are of the right size for our food and non-food offer", meaning that over 100 stores had "under-utilised space" which might be filled with concessions such as camera shops.

Independent analyst Nick Bubb said: "If Sainsbury think that 25 per cent of their stores are over-spaced, where does that leave Tesco?"

The retailer's shares, which were trading above 400p a year ago, fell 4.5 per cent to 257p as new chief executive Mike Coupe unveiled a first-half pre-tax loss of £290m and warned of a likely cut in the final dividend.

Mr Coupe, who arrived as chief executive in July following nine years of growth in more benign conditions under Justin King, said "the next couple of years in our industry will be extremely challenging" and cited deflation as a key issue.

He said Sainsbury's would invest an additional £150m in lowering prices over the next 12 months, hitting profitability and implying a cut in the final dividend.

It would also increase its non-food range, offering more clothing, homewares and seasonal products, improve the quality of 3,000 own-brand products, and trial new store formats such as small convenience stores designed for takeaway food.

The measures will be funded by Sainsbury's cutting new store space by a third to 500,000 square feet in each of the next two years, slicing around £750m from capital expenditure, and slashing costs by £500m over three years.

Mr Coupe said: "We have examined every aspect of our business and we have good foundations for future growth in our supermarket and convenience estates, our online and non-food businesses and in Sainsbury's Bank."

The retailer employs over 320 in its banking arm based in Edinburgh and this year announced plans for expanding by up to 25 per cent after taking full control of the venture last year.

Sainsbury's posted an underlying pretax profit of £375m for the six months to September 27, ahead of analysts' expectations of about £350m but down from last year's £400m.

Mr Coupe said: "We are facing a once-in-a-generation combination of cyclical and structural change in the industry.

"I firmly believe that this strategy ... will focus and energise our business to the benefit of customers, colleagues and shareholders alike."

Bryan Roberts, analyst at Kantar Retail, said: "The establishment of a war-chest to fund price investment might help mitigate some advances by the German discounters, but we are fearful that it nullifies only one of the discounters' adv antages - price.

"What it does not address is that the discounters are also winning because they are quick to shop and easy to understand."