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Sainsbury boss staying put as firm outshines Tesco
November 14, 2012 / 7:15 AM / 5 years ago

Sainsbury boss staying put as firm outshines Tesco

LONDON (Reuters) - J Sainsbury’s highly-respected boss rejected rumours he might be about to leave Britain’s No.3 grocer, as strong growth at convenience stores and online helped it to outshine market leader Tesco with higher profit.

Shopping trolleys are lined up in front of a Sainsury's supermarket in London October 5, 2011. REUTERS/Luke MacGregor

Earlier this month, the Financial Times newspaper quoted unidentified friends of Sainsbury’s long-serving chief executive Justin King as saying his dream job would be to run Formula One motor racing, fuelling speculation he might step down.

“I do understand why, when someone’s been in a job for eight years successfully, people think they’d have on their mind doing something else, but I‘m very happy at Sainsbury‘s,” King told reporters on Wednesday.

He said he regarded the firm as having by far the best growth opportunities of Britain’s major grocers in the years ahead, adding: “I see myself playing my part in those.”

King was speaking after Sainsbury’s beat forecasts with a 5.4 percent increase in first-half profit, helped by 20 percent sales increases at its online and convenience stores businesses.

Britain’s retailers are mostly struggling as disposable incomes are squeezed by rising prices, subdued wages growth and government austerity measures.

But online retailers are bucking the trend as time-pressed shoppers look to pick up bargains. People are also buying more groceries locally to cut back on waste and high petrol prices.

Tesco, Britain’s biggest retailer, is suffering from its exposure to out-of-town hypermarkets and non-food goods, where shoppers are cutting back most. Last month, it reported a 12.4 percent fall in first half UK trading profit.

Britain’s No.4 grocer Morrisons last week posted a 2.1 percent fall in third-quarter underlying sales, while No.2 Asda will publish third-quarter sales on Thursday.

“Sainsbury’s continues to succeed in an increasingly competitive grocery environment that is characterised by low to negative volume growth,” said analysts at Conlumino.


Last week an industry survey said British retail sales slowed sharply in October, while earlier this month electrical retailer Comet collapsed into administration, threatening 6,600 jobs.

King said finance minister George Osborne’s December 5 autumn statement should focus on job creation and on making employment as affordable as possible for companies. “Employment is by far the most powerful force for good in our economy,” he said.

Sainsbury’s shares are up 14 percent over the last year, partly buoyed by the return of speculation regarding a possible renewed bid attempt from its 26-percent Qatari shareholder.

But the stock was down 2 percent at 340.3 pence by 1120 GMT, as analysts highlighted a very promotional, and potentially margin-hurting, market in the run-up to Christmas, noting that Morrisons on Tuesday launched a 10 percent off discount card.

Sainsbury’s made profit before tax and one-off items of 373 million pounds in the 28 weeks to September 29, ahead of analysts’ average forecast of 371 million pounds in a company poll.

First-half sales rose 4 percent to 13.4 billion pounds as Sainsbury’s increased its market share to 16.7 percent, its highest for nearly a decade. Last month the firm posted better-than-expected second-quarter sales growth.

Industry data has shown Sainsbury’s sustaining market share gains from rivals into its second half as it also benefits from the success of its “Brand Match” pricing initiative, its strength in cheaper own-brand food ranges and the popularity of some of its non-food ranges, like Tu clothing.

While the operating profit margin was unchanged, profits were underpinned by 60 million pounds of cost savings.

Sainsbury’s is paying an interim dividend of 4.8 pence a share, up 6.7 percent.

For a Reuters Insider interview with Sainsbury's CFO John Rogers please click on:

($1 = 0.6293 British pounds)

Reporting by James Davey; additional reporting by Mo Abbas; Editing by Hans-Juergen Peters and Mark Potter

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