Sainsbury's profits faltering as King hands over his crown
Sainsbury's said farewell to nearly a decade of rising profits under Justin King as sales growth slowed to a trickle and the departing chief executive warned of tough times to come.
Mr King hands over to commercial director Mike Coupe in July following 10 years in charge of the supermarket, after his last set of annual results showed underlying pre-tax earnings rose 5.3% to £798m in the 12 months to March 15.
It was the ninth year in a row of profits growth under his stewardship but like-for-like sales growth of 0.2% was the lowest for nine years.
Sainsbury's warned that the current financial year's sales performance would be similarly flat, while analysts expect Mr Coupe's first set of annual results as boss in 2015 to show a fall in profits to £762m.
Mr King was dismissive of talk of a price war in the sector as established grocers try to face down the threat of what he called the "German discounters", Aldi and Lidl, which are gnawing at more-established retailers' market share.
Morrisons has recently announced a rash of discounts after saying it would invest £1bn on prices, but the long-serving retail boss said "price skirmishes" had been part of the "cut and thrust" of the sector throughout his career.
Mr King said a focus on quality, affordable own-brand products had helped Sainsbury's succeed in a tough retail environment. Its market share has held up at 16.8% while others' have declined amid the advance of the discounters.
But he warned: "While the general economic outlook is showing some signs of improvement, conditions in the food retail sector are likely to remain challenging for the foreseeable future as customers continue to spend cautiously."
Mr King's swansong as chief executive has been marred by its most recent periodic trading update, which showed a fall in like-for-like sales after 36 consecutive quarters of growth.
But he rejected suggestions that he was leaving the business at the top and said he was confident it would go from strength to strength.
Sainsbury's results showed a £92m hit to its balance sheet as it scrapped planned supermarket developments – though it still opened 13 supermarkets during the year and extended six, adding a million square feet of space.
There is now a much greater focus on its network of smaller convenience stores, with 91 opened in the year, taking their total number above the number of supermarkets for the first time, and reaching sales of £1.8bn.
Meanwhile annual online grocery sales, up 12%, have passed £1bn, while general merchandise and clothing sales were growing at twice the rate of food, with the Tu clothing brand generating revenues of around £750m.
In total, underlying sales were up 2.8% to £26.4bn, but like-for-like performance grew 1.4%.