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LONDON (Alliance News) - J Sainsbury Wednesday cut its like-for-like sales forecast for the second half of the year, after it said trading in the second quarter slumped, a move that had been expected by analysts after the whole sector continued to be hit by competition from discounters and premium grocers.

The supermarket also admitted that the sector is going through a big change as consumer shopping habits have shifted and price deflation has set in.

"The market remains dynamic and fiercely competitive. The long-running trend of more frequent, convenient shopping has accelerated, resulting in smaller basket sizes. An increase in price investment and short-term competitor promotional activity, combined with favourable commodity markets, has resulted in deflation in many areas of our food business," said Chief Executive Mike Coupe in a statement.

Coupe, who's been at the helm only 84 days, told journalists the UK grocery market is facing its most challenging times in his 30 years in the industry. "Customers now have more choice than they have ever had before, and they are shopping around now more than ever before," said Coupe.

Sainsbury's, the UK's third-largest supermarket chain by market share, revealed that sales momentum weakened further in the 16 weeks to September 27, reporting a decline in like-for-like sales in the second quarter of 2.8% year-on-year excluding fuel, and down 4.1% including fuel, its third consecutive quarterly decline.

Prior to these declines, Sainsbury's had been enjoying 36 quarters of growth on a like-for-like basis, meaning nine years of unbroken sales growth.

Sainsbury's said in June that it was expecting like-for-like retail sales to grow in line with the previous year's 0.2% growth including contributions from new space, and to be flat excluding new store openings. It now expects second half like-for-like sales to be similar to the first half, when retail sales and like-for-like sales for the first half were down 2.1% year-on-year excluding fuel.

Rival Tesco said it had been notified by the Financial Conduct Authority that the UK regulator has started a full investigation after Tesco admitted it had overstated its profit guidance for the first half of its financial year.

Tesco said it would continue to cooperate fully with the FCA and other relevant authorities considering the matter. Tesco has already secured Deloitte to conduct an independent review into the issue.

Last week, the UK accountancy regulator the Financial Reporting Council, said it was monitoring the situation closely, but would not act until Tesco's own investigation was completed.

Tesco could be facing fines if it is found to have broken accounting rules.
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Markets: The FTSE 100 has recovered some of its opening losses by mid-morning Wednesday, after another fall in European purchasing managers indices added pressure on the European Central Bank to provide further stimulus of the eurozone economy at its monthly meeting on Thursday. But a poor performance by UK supermarket stocks, following a weak trading update from Sainsbury's, continues to drag on the blue-chip index.

The pound has slightly recovered after falling to a 3-week low against the dollar at USD1.6158 earlier following data showing that UK's manufacturing sector growth fell to a seventeen month low in September.

Brent oil futures are broadly flat Wednesday after hitting a two-year low on Tuesday.

Trading in the US index futures suggests that stocks may open slightly lower. The DJIA, S&P 500 are set to open down 0.1%, while the Nasdaq Composite is set to open down 0.2%.

FTSE 100: down 0.5% at 6,587.19
FTSE 250: down 0.5% at 15,309.59
AIM ALL-SHARE: down 0.6% at 745.33
GBP-USD: down at 1.6194
EUR-USD: down at 1.2595
GOLD: flat at USD1,208.27 an ounce
OIL (Brent): flat at USD94.74 a barrel
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Other Top UK Corporate News
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The new chief executive of Tesco has put its loss-making video-streaming business, Blinkbox, up for sale, The Times reported. Dave Lewis is understood to be reviewing all options for the business, including closing it should it be unable to attract a buyer, the paper said. Lewis is understood to have decided the business is a distraction and is said to have informed senior Blinkbox staff about the decision when he visited the company's offices in London on Friday.
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BAE Systems said it has been handed a GBP600 million contract to manage Portsmouth Naval Base and to support the Royal Navy's surface fleet and global operations at the site. Under the deal, the FTSE 100 aerospace and defence group will provide support services to ships and will handle the management of the Portsmouth Naval Base on behalf of the Royal Navy. It separately saod its US unit it has privately placed USD1.2 billion of guaranteed notes with institutional investors, and it will use the funds to repay some debts and for general corporate purposes. BAE Systems Holdings Inc issued the notes and the parent company is guarantor. The notes consist of USD800 million of notes paying 3.800% interest and maturing on October 7, 2024, and USD300 million of notes paying 4.750% interest and maturing in October 7, 2044.
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Defence contractor Babcock International Group said it has won a GBP2.6 billion contract extension to continue providing services at the Clyde and Devonport naval bases through to March 2020. The company said the new agreement, which falls under the Ministry of Defence's maritime support delivery framework and replaces the existing warship support modernisation initiative contracts, will also cover a number of surface ship projects.
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A group of investors has joined forces to sue Lloyds Banking Group and five former executives of the bank, alleging they were misled about the British government-arranged acquisition of HBOS in 2008 which they claim wiped around GBP6 billion off the value of their shares, Reuters reported on Tuesday. The claim by the Lloyds Shareholder Action Group names former chairman Victor Blank, former chief executive Eric Daniels, former finance chief Timothy Tookey, former retail banking head Helen Weir, and former wholesale banking boss George Truett Tate.
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Three former traders at Barclays, who were charged in the UK with manipulating the London Interbank Offered Rate, sued the bank in a US court claiming it was still responsible for covering their legal fees under a law protecting whistleblowers, Bloomberg reported on Tuesday. Alex Pabon, Jay Merchant and Ryan Reich said they had cooperated with authorities in both countries with the widespread investigations into the manipulation of the benchmark interest rate. They claim they were acting in the interest of Barclays, Bloomberg said.
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US streaming service Netflix is set to sign a deal with telecoms groups including BT Group and TalkTalk Telecom Group to make its television shows and films available via the YouView platform, the Financial Times reported on Tuesday. YouView is an internet-TV platform owned by a consortium of telecoms groups and broadcasters, also including the British Broadcasting Corp, Channel 4 and Channel 5. The FT said Netflix is expected to be made available on the platform by the end of the year and would mean British Sky Broadcasting Group is the only pay-TV company in the UK which will not be providing on-demand services from other content owners.
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Estate agency Countrywide said it has decided to accelerate its capital returns policy and will Wednesday start a share repurchase programme for up to GBP20 million. The company said it continues to target a dividend of between 35% and 45% of 2014 reported group profits after tax but before any amortisation.
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UBM said it will acquire events and marketing business VSS-AHC Consolidated Holdings Corp, also known as Advanstar Communications, for a total of USD972 million. The acquisition will be funded via a new USD100 million bridge facility and a GBP563 million rights issue to be launched in November. UBM plans to host a markets day ahead of the rights issue, where Chief Executive Tim Cobbold will set out its strategy for growth.
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St Modwen Properties said it expects pretax profit for the full year to November 30 to be "materially ahead" of 2013 and above existing market consensus. The company, which specialises in regenerating brownfield land across the UK, said improvement in the commercial property market continues to "gather momentum", and there is a noticeable acceleration in tenant enquiries across its sites, while occupancy levels remain high. As a result, it said, "management expectations for the full year's profit before all tax have increased beyond existing market consensus and this is now expected to be materially ahead of 2013."
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Greene King said its chief financial officer is to step down owing to ill health and has poached the finance director of rival JD Wetherspoon to replace him. Greene King said Matthew Fearn has decided to step down as CFO and as a director of the company in order to focus on his health. Fearn has been absent from his role since February suffering from a long-term illness. He will be replaced by Kirk Davis, currently the finance director at rival JD Wetherspoon. Wetherspoon confirmed the move and said it is in the process of identifying a successor.
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Enterprise Inns said it had agreed the terms of a partial refinancing of its 2018 bonds, and has also arranged a new GBP138 million non-amortising revolving credit facility on improved terms, moves that extend its debt profile and lower its interest payments. The pub operator said it had received acceptances for GBP249.5 million of its outstanding 6.500% secured bonds due in 2018, which it will buy at a cash price of 108.75% of their principal amount. It has issued GBP249.5 million of secured bonds with a coupon of 6.00% and a maturity of October 2023 instead.
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WS Atkins said it has agreed a deal to buy Houston Offshore Engineering LLC for USD73 million. The Houston, Texas-based company reported revenue of USD41 million in the year to December 31, the FTSE 250-listed group said, and has around 150 employees. Atkins said Houston Offshore has specialist experience in the design of offshore deepwater floating production platforms.
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AIM Movers
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Graphene Nanochem shares are doing well after it received its second commercial order, valued at USD5.6 million. for the PlatQuartZ Series oilfield chemicals product. Victoria is also up after it issued 100,000 new shares at 323.5 pence a share to various sellers of the Abingdon Flooring business it acquired on Tuesday. However, the shares were not part of the consideration it paid for Abingdon, but were being taken as an investment by the various sellers, "reflecting their confidence in the future of the company". London Mining is a big faller for a third consecutive day after it raised financing concerns Monday, saying that it does not have sufficient liquidity to continue trading without further financing. Ferrum Crescent is down after it reported a wider pretax loss for its last financial year. Blinkx is also down after it warned that revenue had continued to slow in its second quarter, and it now expects revenue in the half year to end-September to be between USD102 million to USD104 million, lagging behind USD111.6 million a year before. It said it expects its earnings before interest, tax, depreciation, amortisation, acquisition charges and exceptional costs to be approximately break even.
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Top Economics And General
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British manufacturing sector growth eased unexpectedly to its slowest pace in seventeen months, survey results from Markit Economics and the Chartered Institute of Purchasing and Logistics, or CIPS, showed. The seasonally adjusted Markit/CIPS manufacturing purchasing managers' index, or PMI, fell to 51.6 in September from 52.2 in August. Economists had expected the index to rise to 52.7. This marked the slowest rate of expansion in seventeen months. A reading above 50 signals expansion in manufacturing activity.
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The Eurozone manufacturing moved closer to stagnation in September as German factory sector contracted for the first time in 15 months, final data from Markit Economics showed. The manufacturing Purchasing Managers' Index fell more than intially estimated to a 14-month low of 50.3 from August's reading 50.7. The reading was below the earlier flash estimate of 50.5. The average PMI reading for the third quarter was 50.9, also the lowest since the same quarter of 2013.
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China's manufacturing sector expanded at a stable rate in September, exceeding economists' expectations, figures from the China Federation of Logistics and Purchasing, or CFLP, showed. The manufacturing purchasing managers' index, or PMI, came in at 51.1 in September, the same as in August. Economists had expected the index to decrease to 51.
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An index measuring business sentiment in Japan showed mild upside in the third quarter of 2014, the Bank of Japan revealed on Wednesday in its quarterly Tankan business survey. The large manufacturers index came in with a score of 13, beating forecasts for 10 and up from 12 in the second quarter.
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Ireland's manufacturing sector expanded at a slower rate in September, survey figures from Markit Economics showed. The seasonally adjusted Investec purchasing managers' index, or PMI, fell to 55.7 in September from 57.3 in August. This marked the sixteenth consecutive month of growth in the manufacturing sector.
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Thousands of pro-democracy protesters turned their backs on the Chinese flag-raising ceremony in Hong Kong early Wednesday marking China's National Day. Fireworks planned for the evening were cancelled, city officials said. Crowds were blocking major roads in several districts, continuing a protest that began Sunday. Protesters are demanding reforms ahead of the 2017 elections, including the public nomination of candidates for next chief executive.
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Islamic State fighters have overrun Kurdish defensive lines around the besieged town of Kobane on Syria's border with Turkey, a monitoring group said Tuesday. The jihadists have advanced to within 2 kilometres of the town, Rami Abdel-Rahman, director of the Syrian Observatory for Human Rights, told dpa. In Iraq, British warplanes carried out their first strikes on Islamic State targets there, Defence Secretary Michael Fallon said in London.
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Afghanistan on Tuesday signed a long-delayed security pact with the US and a status of forces agreement with NATO. The deals were signed a day after Ashraf Ghani was sworn in as president, in a power-sharing arrangement. His predecessor, Hamid Karzai, who had ruled the country since the US-led invasion in 2001, had refused to sign the agreement. The bilateral security agreement allows 9,800 US soldiers to stay in the country after the NATO-led coalition ends its combat operations at the end of the year.
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US public health authorities are working to identify people who had direct contact with a man who was confirmed Tuesday as the first case of the current Ebola strain diagnosed outside of Africa. The patient is critically ill and in isolation at Texas Health Presbyterian Hospital in Dallas, Texas, US health authorities said. The patient flew to Dallas from Liberia earlier this month to visit family and developed symptoms on September 24. The patient sought care two days later, and then was checked into in intensive care unit of the hospital on Sunday. Tom Frieden, chief of the US Centers for Disease Control and Prevention (CDC), said that he believed the patient, who was not identified, was not infectious while on the flight. Frieden said there was "zero" risk to fellow airline passengers.
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The leaders of US and India said Tuesday that they intend to deepen their relationship by focusing on their shared democratic values. Indian Prime Minister Narendra Modi and US President Barack Obama held a second round of face-to-face meetings after a working dinner on Monday - a rare honour of back-to-back visits to the White House extended to few guests.
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Afternoon Watchlist (all times British Summer Time)

13:15 US ADP Employment Change
14:45 US Markit Manufacturing PMI
15:00 US Construction Spending
15:00 US ISM Manufacturing PMI
15:30 US EIA Crude Oil Stocks change
n/a US Total Vehicle Sales
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Thursday's Key UK Corporate Events

Pantheon International Participations - Half Year Results
Domino's Pizza Group - Interim Management Statement
Electrocomponents - Trading Statement
Carillion - Interim Management Statement
Ted Baker - Half Year Results

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Thursday's Key Economic Events (all times British Summer Time)

All Day China National Day
00:50 Japan Foreign bond/stock investment
09:30 UK PMI Construction
10:00 EU Producer Price Index
12:30 US Challenger Job Cuts
12:45 EU ECB Interest Rate Decision
13:30 EU ECB Monetary policy statement and press conference
13:30 US Jobless Claims
14:45 US ISM New York index
15:00 US Factory Orders
15:30 US EIA Natural Gas Storage change
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