Tesco and Sainsbury’s will go head-to-head this week when the supermarket giants present figures from a tricky summer trading period.

Sainsbury’s has outperformed rivals Tesco and Asda as its feed a family for a week for £50 campaign struck a chord with consumers

Tesco’s £500 million (€577 million) price cutting campaign has been hailed as a boost for under-pressure households, but in London it is also being seen as a signal that the supermarket retailer wants to “get its mojo back”.

Interim results on Wednesday are expected to reveal that UK like-for-like sales excluding fuel and VAT fell 1.2 per cent in Tesco’s second quarter, as shoppers benefited from fierce competition among rival supermarket and discount chains.

The decline in sales, which would represent a deterioration on the 0.7 per cent fall in the previous quarter, comes despite British Retail Consortium figures showing inflation running at more than five per cent in recent months.

Matthew Truman, an analyst at JP Morgan Cazenove, said Tesco’s latest price offensive involving 3,000 products, was part of a drive to help the group “get its mojo back” in the UK.

Tesco’s share of the grocery market slipped to 30.4 per cent from 30.8 per cent in the three months to September 4, while Sainsbury’s and Morrisons saw slight gains.

Dave McCarthy, an analyst at Evolution Securities, said the Big Price Drop is the biggest admission yet that Tesco’s UK business faces “severe issues”.

He believes the price cuts are a step in the right direction but are “underwhelming” and Tesco’s competition will be breathing a sigh of relief.

He added: “We suspect that unless Tesco cuts prices further, we will not see much impact once things have settled down and that Tesco will return to trend.”

Despite the pressure, Tesco is still expected to report profits as it benefits from growth in countries including Korea, Thailand, and China.

The only blot on its positive overseas story is the US, where it hopes to break even by the second half of the 2012/2013 financial year, and Japan, where it recently announced it is exiting.

Tesco’s push into providing mortgages and current accounts, originally due to be launched this autumn, is expected to be delayed until next year while it makes sure its new systems work properly.

Christopher Hogbin, analyst at Bernstein Research, expects group sales to increase by eight per cent to £32.2 billion in the half-year and pre-tax profits to rise 8.5 per cent to £1.7 billion.

In contrast to Tesco, Sainsbury’s is set to reveal its recent solid growth has continued when it updates on the same day.

The UK’s third biggest supermarket chain is expected to report a 1.5 pr cent increase in like-for-like sales excluding fuel in its second quarter, down from 1.9 per cent previously. Its figures include VAT, whereas Tesco’s do not. Sainsbury’s has outperformed rivals Tesco and Asda as its feed a family for a week for £50 campaign struck a chord with consumers.

Industry figures from Kantar Worldpanel show that Sainsbury’s sales grew 4.8 per cent in the three months to September 4, giving it a 16.1 per cent share of the grocery market.

The chain has recently dropped its Try Something New Today strapline in favour of Live Well For Less as part of a drive to be seen as better value for money by consumers.

It is also trialling a price matching scheme in several stores in Northern Ireland.

Its figures are expected to have been boosted by running promotions on fuel during the period, which helped encourage more shoppers to drive to its stores.

Sainsbury’s has also been aggressively expanding its non-food ranges to help it catch up with rivals Tesco and Asda. Its TU clothing range is expected to have benefited from a recent advertising push.

However, Dave McCarthy of Evolution Securities, warned that Sainsbury’s may be impacted by Tesco’s Big Price Drop.

He said: “With the thinnest margins in the sector and the weakest cashflow, Sainsbury’s is the most vulnerable to any increased price activity.”

Shares in Halfords have nearly halved in value in the past year after the retailer was hit by the downturn in consumer spending and supermarkets muscled in on its bike sales.

Demand for bikes has been boosted in recent years as the soaring cost of petrol encourages people to cycle to work.

And the success of Britain’s top cyclists, including Mark Cavendish in the Tour de France and recent world championships, has also helped lift demand for racing bikes, including those under Halfords’s own Boardman range.

But Halfords’s share of the market has come under pressure from strong competition from the likes of Tesco and Asda and availability problems after it suffered disruption to its supply chain.

Halfords has been fighting back in recent months after it introduced new cheaper ranges, such as its Trax bikes, and put on more special offers.

Its bike sales saw 11.5 per cent growth in its last update, with premium brands Boardman, Voodoo and Carrera seeing strong growth. However, this was at the expense of its profit margins amid strong competition.

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