LONDON BRIEFING:Supermarkets group J Sainsbury, Britain's third-largest food retailer, will show its rivals how it's done today when it reports another set of rising sales, profits and market share.
In sharp contrast to Morrison’s, whose poor performance disappointed analysts last week, Sainsbury’s is expected to push first half profits about 4 per cent higher, to £370 million or so, on the back of a near-2 per cent uplift in underlying sales.
Of more interest to the group’s City followers, however, is whether there will be any announcement about the future plans of Justin King, its highly regarded chief executive. Although still only 51, King has been at the helm of Sainsbury’s for almost nine years and is the longest-serving chief executive of Britain’s Big Four supermarkets.
Speculation has been mounting in recent weeks that King may be considering a change of career, having successfully restored Sainsbury’s fortunes after the dark days of empty shelves and stock shortages caused by a disastrous infrastructure system.
By March 2014, he will have served 10 years as chief executive and, so the speculation goes, may be planning to light the touch-paper to a lengthy, but orderly succession process.
He would certainly be bowing out on a high. All retailers are struggling with rising food price inflation and the dwindling disposable incomes of their customers but King has pulled off a couple of masterstrokes that have kept the shoppers coming through the doors. These include sponsorship of the successful Paralympic Games over the summer and the launch of its “Brand Match” promotion.
While other companies preferred to sponsor the main Olympic Games, King was hugely enthusiastic about the Paralympics, even at the planning stages when few could have foreseen just how popular they would be. His vision has paid dividends for Sainsbury’s, which has been winning customers from rivals such as Morrison’s and market leader Tesco. Recent market share data put Sainsbury’s share at 16.8 per cent, up 6.4 per cent over the year, while Tesco slipped from 31 per cent to 30.5 per cent and Morrison’s from 12 per cent to 11.5 per cent.
The group’s innovative Brand Match promotion has proved popular with customers, despite scepticism when it was first launched. Under the scheme, prices of Sainsbury’s branded products are compared with those at Tesco and Asda, with customers handed a print-out at the till showing them how much less – or more – they paid at Sainsbury. If their branded goods were more expensive, they’re given a coupon for the difference.
When asked earlier this year if he had plans to bow out, the Sainsbury chief insisted he was staying on. But rumours persist that he might have his sights on a move into politics, perhaps fuelled by an appearance on the BBC’s Question Time programme last year. There has also been speculation linking him with Formula 1 – a move that would no doubt go down well with his son Justin, a rising star in the motor racing world. If King should decide to go, potential successors include Sainsbury trading director Mike Coupe and Kate Swann, who is stepping down as chief executive of WH Smith next year, having successfully turned round the business during her decade in charge.
Cost of living
The unexpectedly sharp rise in inflation from 2.2 per cent to 2.7 per cent last month brings more bad news for Britain’s savers and pensioners – and Bank of England governor Sir Mervyn King, who may well have to reopen his already bulging correspondence file with the chancellor as he explains why the cost of living is so far adrift from the government’s 2 per cent target.
Behind the jump in October’s Consumer Prices Index – the biggest increase in more than a year – was a hefty hike in tuition costs, which soared by more than 19 per cent after university fees were up to £9,000. There were also further rises in the price of food, including confectionery, where the eagle-eyed statisticians at the Office for National Statistics took into account the shrinking size of many chocolate products and treated the changes as price rises.
Most economists expect the inflation rate to hit 3 per cent in coming months, as the price rises being pushed through by Britain’s energy suppliers come into effect. Inflation is still nowhere near as high as it was in September 2011, when it hit 5.2 per cent, but the rise will put already squeezed household budgets under further pressure. That in turn raises fresh fears over the progress of the economy in the fourth quarter, adding fuel to concerns Britain may have emerged from its double-dip recession only to fall into a triple-dip downturn next year.
