SALES growth at J Sainsbury cooled in the first half of the year as the supermarket grappled with rising costs and competition intensity.

Underlying profit before tax was down nine per cent to £251m as the group invested in pricing to maintain its competitiveness, and consolidated losses made by Argos.

The grocery sector has been hit by additional costs in importing foods since the Brexit vote caused the value of sterling to fall. The increasing popularity of Aldi and Lidl have also led supermarkets to rethink their long-term strategies.

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In Sainsbury’s second quarter, like-for-like sales grew by just 0.6 per cent, lagging far behind the 2.3 per cent growth recorded in the first quarter.

Sainsbury chief executive Mike Coupe had previously warned that non-food sales would be dragged down by inflation and weak wage growth.

Overall growth for the six months to September 25 was 1.6 per cent, driven by a 2.3 per cent growth in grocery, which has accelerated after a muted second half last year. An overall decline in like-for-like sales in general merchandising, which incorporates Argos and Habitat, dragged this down.

This growth is behind retail price index (RPI) inflation, which is currently 3.9 per cent. The supermarket chain said it expects cost inflation of around two to three per cent for the full-year.

In the 12 weeks to October 8, Kantar Worldpanel figures show supermarket sales increased in value by 3.1 per cent compared with the same period last year.

Mr Coupe said: “We have delivered a good performance across the group in the last six months, with more customers choosing to shop at Sainsbury’s in the first half than ever before. We are now three years into delivering our differentiated strategy and are seeing clear results.”

Sales at Sainsbury, the second largest supermarket in the UK, were £16.3 billion for the period, up 17 per cent, largely helped by the full consolidation of Argos.

Sales within Sainsbury’s supermarkets grew 0.7 per cent overall. In its convenience estate, sales were up 8.2 per cent, and online sales grew 7.2 per cent.

Sainsbury has been forced to adapt to a changing shopper environment, where time-conscious shoppers seek quick, but more frequent, visits to smaller stores. Over the year, the group expects to open 25 new convenience stores but only three supermarkets.

In Scotland it operates 35 supermarkets and 65 convenience stores.

Sainsbury said that after achieving £100m in costs savings in the first half it expects to deliver £185m this year giving a total of £540m, exceeding a £500m target set in 2014.

Last month Sainsbury revealed it was planning to cut 2,000 jobs, including all in-store human resource (HR) and payroll clerk roles.

A reduced 3.1p interim dividend was declared.

Mr Coupe added: “While the market remains competitive, we are well-placed to navigate the external environment and we remain focused on delivering our strategy. The outlook for the full year underlying profit expectation remains in line with current market consensus.”

Analyst consensus has estimated full year underlying profit of £572m.

According to Kantar, over a 52-week rolling basis, Sainsbury’s market share has declined 28 basis points, which the group contributed to continued price investment and the expansion of Aldi and Lidl.

Laith Khalaf, senior analyst at Hargreaves Lansdown said: “A slow summer has dragged down profits at Sainsbury’s, which is battling industry-wide headwinds in the retail sector.

“Consumer spending is under pressure from higher inflation, while it’s costing supermarkets more to fill their shelves with stock.”

Since acquiring Argos, Sainsbury has now opened 112 Argos stores within its supermarkets.