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The shares fell 18.2p, or 6.7%, to 254.4p after the chain said underlying pre-tax profit fell 17.9% to £308mln from £375mln at the same time last year on a 2% dip in sales to £13.6bn.
Pre-tax profit was £339mln against a £290mln loss last time and basic earnings per share were 13.6p versus an 18p loss per share beforehand.
The group also slashed its dividend by 20% to 4p from 5p previously.
Chief executive Mike Coupe said Sainsbury's planned to maintain full year dividend cover at two times our underlying earnings for the full year.
He added: "We continue to run the business efficiently and our cost savings programme is ahead of plan."
Shore Capital said the results had topped its expectations and Sainsbury's had managed to resist pressure from discounters better than its peers.
But the broker's analysts Darren Shirley and Clive Black said it was important to remember the company's profits were still falling and forecasting was difficult in a fragile market.
"Whilst the mood music from Tesco (LON:TSCO, hold at 173p) UK remains rational and we sense that the market leader is progressing at relatively pedestrian pace, Sainsbury could yet be negatively impacted should a Tesco recovery of note come through," they said in a note.
Although food sales declined nearly 1%, volumes in the group's Taste the Difference range rose more than 2%.
Sales at supermarkets declined just over 2% driven by food deflation, lower like-for-like volumes and customers shopping online.
Clothing performed strongly, with sales up nearly 10%. The chain launched its own brand Tu range online and said initial sales had topped management expectations.
Convenience store sales rose nearly 11% and Sainsbury's opened 37 new shops, taking the total to 741 at the half-year.
The group raised the pay of 137,000 staff by 4% including those under 25.
The company said the market stayed particularly tough. Overall market share declined marginally, by 17 basis points (100 basis points equals a percentage point), to 16.5%, driven in particularly by growth of cut-price rivals.
Sainsbury's expects to save about £225mln by the end of this financial year and said it was on track to save £500mln in the next three years.
Chief executive Mike Coupe said: "We continue to run the business efficiently and our cost savings programme is ahead of plan."