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Sainsbury’s sales slide as Justin King prepares to bow out Justin King insists Sainsbury's will not go the way of Tesco when he departs
(about 14 hours later)
Sainsbury’s has posted a fall in underlying sales for the second quarter in a row as the big four grocers attempt to battle the rising threat of the discounters. Sainsbury's outgoing chief executive Justin King has insisted the supermarket will not unravel when he leaves – as Tesco did after Sir Terry Leahy's departure – despite revealing a second consecutive quarter of falling sales.
Sainsbury’s chief executive Justin King, who is leaving the chain next month after 10 years in charge, said consumers continued to spend cautiously, leading to the slowest industry growth in a decade. Mr King, who is being replaced by Sainsbury's commercial director Mike Coupe after 10 years at the helm, also attacked Sir Terry's Tesco legacy, saying the former boss's ambitions were only ever "short term". He said: "Let's draw attention to some of the key differences. Tesco was run by a team that didn't expect to be around in the long term, and that can lead to people thinking in the short term and not the long term.
Like-for-like sales at the UK's third biggest supermarket chain were 1.1 per cent lower when excluding fuel in the 12 weeks to June 7. "I'm handing over to someone who's been on the same journey as me for nine years. Mike has put in place his team for the future, which consists entirely of people who have been with the business previously. [At Tesco] there was massive change. By comparison, we've got continuity and me leaving is the only change."
The total sales figure, which includes changes in store space, was 1 per cent higher than a year earlier. The outspoken chief executive has also promised to give Mr Coupe time to settle in to the role, vowing to keep his opinions of the business to himself, unlike some former bosses of other supermarkets.
In the previous quarter Sainsbury's saw like-for-like sales drop 3.1 per cent in its first decline in nine years, leading to growth of 0.2 per cent across the financial year. Last week, Sir Terry said he was disappointed with the current Tesco performance, while Sir Ken Morrison, the former boss of the Bradford-based supermarket, called the board's strategy "bullshit". Last year, Tesco's former chief executive Lord McLaurin also attacked Sir Terry publicly, saying he had "lost the plot".
All four major supermarket retailers have found themselves squeezed by the rapid growth of German discount chains Aldi and Lidl, with Morrisons and Tesco particularly affected. But Mr King said: "I'll be entitled to attend AGMs because I'm a shareholder, but I intend to leave Sainsbury's on 9 July and I think the legacy of any leader is to give the team and new leader the space to run the business. So I have no intention to speak publicly on the trading."
King said Sainsbury's continued to invest in reducing prices, adding that he is confident the strategy will enable the chain to outperform its peers. His comments come as sales at the supermarket dropped 1.1 per cent in the three months to 7 June, the second fall in a row following 36 quarters of growth. Falling sales at larger stores were propped up by an 18 per cent boost in convenience store sales, while the company's website was also expanded to include its TU clothes range.
He said: "We expect customer spending to remain cautious and we will continue to invest to keep our offer competitive to help customers balance their household budget." Low inflation, tough comparisons following last year's horsemeat scandal, and shoppers spending less caused the fall, according to the company.
But both Mr King and Mr Coupe disagreed with rival supermarkets' assessments that the rise of discounters Aldi and Lidl has created a structural change in shoppers' habits, leading to a price war.
Mr Coupe said: "What we're seeing is not unprecedented. It's much more about competitors letting prices slip and they're now playing catch up."
Mr King added: "Having the right price is necessary, but it's not the only important aspect. Customers are also concerned about quality and provenance."
He leaves Sainsbury's in a far better condition than when he joined a decade ago, but is keen to avoid the downfall suffered at Tesco following Sir Terry's departure. Tesco issued a profit warning, saw profits fall for the first time in 20 years, shut businesses in the US and Japan, and continues to lose customers after Sir Terry left.