Another day, another strategic review in supermarket land. It’s not hard to guess one outcome of Sainsbury’s deliberations: either capital expenditure or the dividend will have to be cut, and a hefty slice from both is probably the best pragmatic course.

Sainsbury’s second-quarter sales weren’t dreadful by the recent standards of Tesco and Morrisons. But a fall in like-for-like sales of 2.8% in the quarter, and 2.1% in the half-year, is sufficient evidence that Sainsbury’s old oasis in the middle of the market – no white-elephant hypermarkets, lots of convenience stores – is gradually being eroded.

Sainsbury’s chief executive, Mike Coupe, thinks some retaliatory blows have already been struck. The supermarket chain is as competitive on price as it has ever been, he says. He’s now matching prices on brands against Asda, which shoppers regard as the real pace-setter. Jolly good, but more of the same will surely be required as shopping habits shift.

At Morrisons, chief executive Dalton Philips thinks his pricing overhaul can be completed without cutting the dividend. The market does not share his faith, which is why the dividend yield on Morrisons’ shares has shot above 8%. At Sainsbury’s, the ratio is 7% after Wednesday’s fall in the share price, implying only marginally less confidence.

One can understand why. Sainsbury’s free cash flow has been negative in each of the past four years as it has blitzed high streets with more convenience stores while still opening, and refitting, supermarkets. The capital expenditure bill was £900m last year. That can be trimmed but not transformed if Sainsbury’s wants to keep opening convenience stores, which it surely does as that’s where the growth lies. As for cost cuts, old-style supermarkets have limited flexibility. Staff still have to be paid and employing fewer of them would obviously hit service levels, which would be a false economy.

So the dividend, where the cash cost was £320m last year, will surely have to take some of the strain. Last year’s payment was worth 17.3p a share. Analysts think this year’s earnings will be about 28.4p. Cover of just 1.6 times looks far too skimpy in the midst of a price war that Tesco has yet to enter properly. Coupe needs all the financial ammunition he can muster.

True stock market bears sense that a rights issue is in the offing. That looks premature, but the current dividend looks a goner. The market has got the message: despite the undoubted quality of management, and the company’s “100%” confidence in its accounting, Sainsbury’s shares stand today at a 10-year low.