Sainsbury’s chief King calls for government to boost job creation

Despite posting total annual sales up 6.8 per cent to £24.5 billion, King said trading remained “challenging” and consumers saw no light at the end of the tunnel as they struggled by on squeezed incomes.

“It’s unlikely that reduction [in income] is going to be recovered in the years to come,” said King.

The main brake on consumer spending was “related to employment, lack of overtime or lack of a job completely”, and that the government needed to give more clarity in areas like tax, rates and business investment to create confidence and jobs.

On the day of the Queen’s Speech he claimed that there had not been “a consistent pursuit of a clear policy that consumers understand”. It came as Sainsbury’s revealed it was cutting its floorspace growth targets from an average 7 per cent over the past three years to 5 per cent in the current financial year to March 2013, and was trimming capital spending this year by £100m to £1bn. However, King said the focus would continue to be on expanding out of its south-of-England heartland to areas like Scotland and the west of England where it is under-represented.

Scotland, where the company is the fifth-biggest supermarket group, with nearly 50 main stores and 16 “Local” convenience outlets, saw growth in Sainsbury’s floorspace of 10 to 12 per cent in the latest financial year.

That compared with growth of just under 2 per cent in the south-east of England. The group said yesterday it planned to open a further ten outlets north of the Border this year, including a convenience store at Shawlands, in Glasgow’s Southside, tomorrow and another “Local” in Aberdeen next Friday.

King added that, even with the slowing in the pace of expansion this year, it would be the fourth-fastest year of floorspace growth for Sainsbury’s ever.

The company, by contrast with disappointing recent sales figures from rivals Tesco and Morrisons, revealed like-for-like sales up 2.1 per cent.

Shareholders benefit via a final dividend of 11.6p, making a 6.6 per cent increase in the total dividend to 16.1p compared with 15.1p in the previous 12 months.

Sainsbury’s Bank, the group’s joint venture with Bank of Scotland, saw profits jump 45 per cent to £16m from £11m, with guidance for further profit progress in 2012-13.

The group said sales of car insurance at the bank had leapt 150 per cent year-on-year, and that the overall better performance had also been helped by offering double Nectar points to customers who bank with the food retailer.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, commented: “A concentration on quality and value continues to reap rewards for Sainsbury. Underlying profits have materialised at the higher end of analyst forecasts, with a dividend increase of over three times that declared by Tesco announced [6.6 per cent compared to 2.1 per cent].”