Sainsbury's is to invest £150 million in price cuts over the next year as it braces itself for several more years of challenging trading conditions.
The supermarket has also scrapped plans to open many new stores as drastically revises its strategy.
A review of the business found the need to improve the quality of 3,000 own-brand products, while the company said it will reduce capital expenditure and make £500 million of cost savings over the next three years.
Underlying profits for the six months to September 27 were 6.3% lower at £375 million but Sainsbury's plunged to a £290 million loss at the bottom line after writing down the value of land it no longer intends to develop.
It also warned that its performance in the second half of the financial year is likely to be weaker than the first.
The company said: "The grocery sector is undergoing structural change as customers shop more frequently, using online, convenience and discount channels more.
"We expect supermarket like-for-like sales in the sector to be negative for the next few years, but we have robust plans to address this challenge."