Sainsbury’s boss Justin King today bid farewell to the City by unveiling a forecast-beating set of record profits, although a question mark was left over the supermarket’s future as it is showing its slowest profit growth for 10 years.
In his final full-year update before stepping down in July, King dubbed the 5.3% rise in underlying profits to £798 million “very strong results by any measure”.
However, the slowdown in profit growth will send alarm bells through the City as the supermarket industry rolls up its sleeves for a price war, triggered by the rapid growth of discounters Aldi and Lidl.
King dismissed fears that a price war — intensified by a marketing blitz by Morrisons — would dent Sainsbury’s margins.
“It used to be said that we were vulnerable to a price war, but the assorted profit warnings of our competitors mean it’s no longer true,” he said.
“Their price investments have largely been PR rather than audited announcements. We are sharper on price than we’ve ever been.”
King said a focus on quality food sourced ethically, rather than simply price, would lure in shoppers and keep sales moving.
King joined Sainsbury’s from Marks & Spencer in 2004, with the retailer in crisis. Staff morale was at rock bottom as it leaked sales to Tesco and attempted to fill empty shelves, but over the past decade annual sales have grown by £10.3 billion to £26.4 billion.
King cited the London 2012 Paralympic Games, which Sainsbury’s sponsored, as a highlight of his time at the helm.
Group commercial director Mike Coupe will take charge; he is under pressure to avoid a repeat of rival Tesco’s disappointing succession plan. Tesco chief Philip Clarke has struggled to propel the retail behemoth forward since taking over from a similarly lauded predecessor, Sir Terry Leahy, in 2011.
Data released today by Kantar Worldpanel showed Tesco and Morrisons suffered falling sales over the last quarter, while Asda and Sainsbury’s notched up respectable increases in sales. However, Aldi, Lidl and Waitrose continued to entice swathes of new shoppers keen to snare bargains and posh products at good value.
