UK supermarket Sainsbury's targets savings in tech drive

LONDON - British supermarket group Sainsbury's said it planned cost savings of £1-billion thanks to technology and automation, as it seeks to close the gap on UK sector leader Tesco.

Sainsbury's did not specify if the savings would result in job cuts, as supermarkets increasingly use robotics for sorting food items in warehouses and self-service checkouts in stores.

"We will unlock a further £1-billion of operating cost savings over the next three years, more than offsetting cost inflation," Britain's second-biggest supermarket said in a statement.

"High-returning investments in technology and automation will drive big steps forward in efficiency," it added.

As part of a strategy update, the group added that it was targeting higher market share.

However, Sainsbury's share price slumped following the announcements, with analysts citing upfront costs of the transformations offsetting future savings.

Sainsbury's traded down 3.8 percent at 265.10 pence on London's benchmark FTSE 100 index, which fell 0.2 percent overall.

Tesco was also hit by the negative investor reaction, with its share price dropping 2.0 percent.

"Sainsbury's shares fell almost four percent on a strategy update that will cost money in the short term," noted Neil Wilson, chief market analyst at Finalto trading group.