Sainsbury profits fall with 'challenging' times ahead

Sainsbury's, the UK supermarket giant, suffered a 1.6 percent sales fall in the first half of its financial year amid low inflation and increasing competition for shoppers' cash. The company's share price rose by 1.8 percent at the open on Wednesday, as the profits fall was less than forecast.

John Rogers, chief financial officer of the supermarket chain, told CNBC on Wednesday the company was "very pleased" with its overall performance and "optimistic" about Christmas. However, near-deflation, increased competition in the U.K. supermarket space, plus a rising business rates and wages bill, is making this a difficult period for retailers.

"The market is very challenging given the growth of the discounters. We've invested significantly in price and we will aim to close that gap even more," Rogers said.

The supermarket has invested £150 million in pricing and is also pursuing a simpler pricing structure with less reliance on 3-for-2 type promotional deals.

Sainsbury's reported an 18 percent fall in first half underlying pretax profit of £308 million ($467 million) for the 28 weeks to September 26th, better than analysts had been expecting. It has also cut its interim dividend to 4p per share.

The retailer's clothes business saw a 10 percent sales boost after investment in that area.

Scott Barbour, Getty Images News, Getty Images

"We're looking forward to selling more Christmas jumpers," Rogers told CNBC.

"We're optimistic about Christmas..Customers tend to trade up and treat themselves and come to Sainsbury's for that quality offer. Of course time will tell."