Sainsbury’s chief in quit talk

Asked whether he would be presenting the group’s preliminary results in May 2014, he said: “I’m not going to answer impossible questions.”

Prior to this he said he was “absolutely committed to this business” and he intended to “play my part in the future growth of the company”.

But his refusal to commit to presenting the annual results next year were in stark contrast to his assurances back in January that he would be presenting the group’s Christmas trading update in January 2014.

At the time he said: “I see myself here for the long term. I look forward to reporting our 2013 Christmas results.”

Earlier in the day, Mr King appeared to quash the long-term rumours when he told Sky News: “I consider myself still to be a relatively young man, so I’ve got a few more years in Sainsbury’s in me yet.”

But he appeared to backtrack at a news conference held in London yesterday when he repeatedly refused to be drawn on any more details.

Speculation has been mounting that Mr King is preparing to leave after nine years as chief executive following reports that chairman David Tyler is looking for a successor.

Mr King was speaking yesterday as Britain’s third-biggest grocer announced another set of forecast-beating annual results.

The group reported its eighth straight rise in annual profit on the back of a 10-year high in market share.

Annual profits for the year to March 16 rose 6.2 per cent to £756m, partly due to very strong performances in online and convenience stores and helped by its sponsorship of the Paralympic Games in London last year.

Like-for-like sales rose 1.8 per cent, beating rivals. However the group predicted more tough times ahead, with forecasts that 2013/14 like-for-like sales will rise between 1.0 and 1.5 per cent.

“For the past three or four years the consumer has gone to a new place. They’re very downbeat about the future, resolutely downbeat. There’s no need to expect change in the next year or two,” said Mr King.

“Customers are cooking more, eating more as a family and wasting less. Customers aren’t saying I’m looking forward to the days when I can waste a bit more. They won’t go back. They are discovering ways of shopping that our parents and grandparents did before us.”

Sainsbury’s, which has a 16.8 per cent share of the market, has benefited greatly from the initiatives introduced under Mr King.

These include ‘Brand Match’, whereby customers get a money off voucher if they could have bought brands more cheaply at Tesco or Asda.

The group has also grown all three of its own-brand ranges – Basics, by Sainsbury’s and Taste the Difference. It has also made good gains in non-food areas like clothing, under the Tu and highly successful Gok Wan ranges, and home accessories.

These initiatives have helped it to report 33 consecutive quarters of underlying sales growth.

While rivals Tesco and Asda were implicated in the horse meat scandal, which broke in January when horse DNA was found in frozen burgers, Sainsbury’s and Morrisons both passed all the tests. Sainsbury’s has been DNA testing its meat over the past 10 years.

Online sales and local convenience stores are the two fastest growing areas in retail as consumers turn to the internet and local shops for both convenience and to avoid paying for petrol.

Sainsbury’s convenience store business is growing at over 18 per cent year-on-year, driven by a combination of new selling space and like-for-like sales growth.

It plans to open two convenience stores a week and at some point this year its convenience estate will reach the 600 mark, meaning that it has an equal number of supermarkets and convenience outlets. Online grocery sales rose nearly 20 per cent year-on-year. Shore Capital analyst Clive Black said: “Justin King has led Sainsbury’s to another year of steady progression in still challenging economic and sector conditions.

“For that the ‘grandfather’ of the sector and his team now deserve considerable credit. Sainsbury’s has developed into a materially more resilient business than was the case when he took control of the reins.”

The group has benefited from problems at market leader Tesco, which has had to retrench and rebuild after posting a profit fall for the first time in 20 years.

In April, Tesco wrote down the value of its property portfolio after deciding not to develop 100 sites.

Mr King said Tesco’s property portfolio was very different to its own, which would add to its earnings, and any Tesco pull back was good for Sainsbury’s.

The group’s total sales rose 4.6 per cent to £25.6bn

The robust performance helped the group to increase the full-year dividend by 3.7 per cent to 16.7p.

Sainsbury’s said the dividend payout would be covered by earnings at a ratio of 1.83 times, up from 1.75 times in the previous year.

It said it maintained its target of increasing the dividend year-on-year and continued to plan to build cover to two times over the medium term.

Bank in store’s own hands

Sainsbury’s has bought out Lloyds Banking Group’s 50 per cent stake in Sainsbury’s Bank for £248m.

David Tyler, chairman of the supermarket, said the decision to take full ownership of Sainsbury’s Bank would “benefit both customers and shareholders and allow its full potential to be realised”.

The bank, which was launched in 1997, has delivered five successive years of profit growth.

It made a pre-tax profit of £59m in 2012/13.

The supermarket said customers taking out a bank product become more loyal and spend more in store.

It currently offers savings, loan, insurance and credit card products.

There are no plans to introduce current accounts or mortgages although John Rogers, the chief financial officer, said he would “never say never”.

The deal is not expected to complete until January 2014 due to regulatory requirements and then there will be a 42-month transition plan for Sainsbury’s to build its own systems.

Analysts at Espirito Santo said: “Our view is that it will be some time before Sainsbury’s will have full control of the bank and have the systems it wants in place.”