SAINSBURY'S says it is planning £150m in price cuts over the next year as it braces itself for several years of challenging trading.

A review of the business also found the need to improve the quality of 3,000 own-brand products, while the company said it will reduce capital expenditure and make £500m cost savings over the next three years.

Underlying profits for the six months to September 27 were 6.3 per cent lower at £375m, but Sainsbury's plunged to a £290m loss at the bottom line after writing down the value of land it no longer intends to develop.

It also warned its performance in the second half of the financial year is likely to be weaker than the first.

A statement said: "The grocery sector is undergoing structural change as customers shop more frequently, using online, convenience and discount channels more.

"We expect supermarket like-for-like sales in the sector to be negative for the next few years, but we have robust plans to address this challenge."

The initiatives on price and products follow a wide-ranging review of the business by new chief executive Mike Coupe, who took over this summer following the departure of long-time boss Justin King.

In common with its major rivals, the retailer is responding to the supermarket price war forced on it by discounters such as Aldi and Lidl.

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.

"However, we need to make sure that we are investing in the right areas, and by reducing our costs and capital expenditure we are ensuring that we have the resources to enable us to do so."

It found that a quarter of its stores have underused space and over the next five years this will be used to expand its non-food goods and also given over for in-store concession partnerships.

Tesco has a similar in-store concession deal with retailer Sports Direct in shops in central Europe and Malaysia.

Sainsbury's said it will reduce capital expenditure to between £500m and £550m a year over the next three years.

This will allow eight new supermarkets but over half of its new space will be convenience stores as it continues to target opening 100 smaller sites a year.