Sainsbury's profits up 11.3% – 'and best is yet to come'

Published on Wednesday 13 May 2009 21:39

JUSTIN King heralded sparkling future growth prospects at Sainsbury's yesterday on the back of a strong profits performance – and dismissed speculation that he may be poached to take over at Marks & Spencer.

Unveiling an 11.3 per cent jump in underlying annual pre-tax profits to 543 million (488m), the chief executive said like-for-like sales growth of 4.5 per cent had been achieved "in the teeth of a very substantial consumer downturn".

Outlining plans for the group to increase new space by 5 per cent – or 850,000sq ft – this year, King said: "I'm proud of the part I have played at Sainsbury in the past five years.

"The most exciting part for Sainsbury lies ahead. I want to play my part in leading that. A chief executive should go at a time of their own choosing. I don't think five years is too long, or anywhere near too long."

He has frequently been mentioned during speculation over who might be Sir Stuart Rose's potential successor as head of M&S.

Sainsbury chairman Sir Philip Hampton also said he expected King to be at the company for years to come, joking: "Justin's got one foot on the accelerator and one nailed to the floor."

Hampton revealed that the search for his own successor was "advanced", with any appointment leaving him free to concentrate on his new role as chairman of Royal Bank of Scotland.

King said developers and landowners were finding it difficult to develop sites in the recession, and this would create opportunities for the food retailer to open new supermarkets, convenience stores and extensions.

"The irony is that the lack of development in our business in the late 1990s and 'Noughties' means that we have a lot of catching-up potential," he said.

"We have the greatest growth potential of any food retailer over the next ten years".

He said 3 to 4 per cent same-floorspace sales growth was "what you can expect from us" in the medium term.

Group customer director Gwyn Burr said 400 of its Basics line – currently 3 per cent of group sales – cost less than 1, helping to "push up basket size".

Sainsbury, which runs more than 500 supermarkets and 300 convenience stores, declared a full-year dividend up 10 per cent at 13.2p for the year to 21 March.

The company also reported a turnaround at Sainsbury's Bank, the joint venture with Lloyds Banking Group, with a 4m profit replacing a 3m loss the year before.

Group-wide, 120,000 staff will share an annual bonus of 60m following the profits jump on the 140th anniversary of Sainsbury's foundation. The average payout is about 500 each, up from 401 last year.