The move, designed to win back lost sales, was announced yesterday by Sainsbury's outgoing chief executive, Sir Peter Davis. He plans to "trade the business more aggressively", slashing prices throughout its stores and going head-to-head with Asda and Tesco.

"By next summer we will be able to address the issue of price and value for money," he said. "We will move our prices down. Over time we think that will improve the business."

Details of the new pricing strategy came as Sainsbury's announced first-half profits of £366m - up from £342m last year - and confirmed that it had poached Marks & Spencer's food boss Justin King, 42, as its new chief executive. He previously spent seven years at Asda.

Mr King, who left Marks & Spencer with immediate effect but cannot join Sainsbury's until March, is known to believe that Sainsbury's has been pursuing a flawed strategy. Sir Peter has poured nearly £3bn into rebuilding the infrastructure of the supermarket group and has repeatedly insisted that sales growth was not his priority. Mr King, however, believes that price is the main battle ground for the big grocers.

Yesterday Sir Peter, who will move up to be chairman, said that the new strategy was his, and not his successor's. "He hasn't had any influence yet," said Sir Peter, "but there have been a lot of discussions. Clearly, however, he is comfortable with the general direction we are going."

Sainsbury's shares closed up 13.25p at 298.25p as investors welcomed the appointment.

Sir Peter said he had "always had it in mind" to cut prices and the right time to move was when his infrastructure renewal programme comes to an end next summer. He plans to deliver big improvements in quality at the same time.

The timing of the price cuts will also coincide with the likely takeover of Safeway by Morrisons, which will create a fourth large, price-driven rival.

Sir Peter would not be drawn on how wide and deep the price cuts would be. "I'm not going to give that figure nine months ahead and before the chief executive has had a chance to look at it in detail. We need to keep our powder dry."

Mr King is joining Sainsbury's on a basic salary of £675,000 plus bonuses and share options. He is also to receive shares worth £685,000 as compensation for giving up his options and bonus deal with his previous employer.

Marks & Spencer moved quickly to fill the gap left by Mr King's departure, promoting its 36-year-old head of menswear, Maurice Helfgott. Chief executive Roger Holmes said: "We are disappointed that Justin is going, but Maurice is a star in this business." M&S will seek an external candidate to replace Mr Helfgott.

The arrival of the M&S man was welcomed by the Sainsbury family, who still own 35% of the £5.8bn company. Lord Sainsbury of Preston Can dover said that he and his brothers Timothy and Simon "fully supported" Mr King and expressed their thanks to Sir Peter "for the leadership he has given the company".

Solicitor Judith Portrait, who represents the shareholding of government science minister Lord Sainsbury of Turville, also welcomed Mr King and paid tribute to Sir Peter.