29th Jan 2014 11:35
LONDON (Alliance News) - J Sainsbury PLC Wednesday said Chief Executive Officer Justin King will step down in July after 10 years at the helm and will be succeeded by Mike Coupe, currently the group's commercial director.
The supermarket chain said King will stand down at the company's annual general meeting on July 9, and Coupe will continue as group commercial director and chief executive officer designate in the interim.
It said John Rogers will continue in his role as chief financial officer.
The market didn't like the surprise announcement, with Sainsbury shares trading 2% lower at 350.00 pence Wednesday morning, the biggest decline on the FTSE 100.
However brokerage S&P Capital IQ raised its recommendation on Sainsbury to Hold, from Sell, and increased its 12-month target price to GBP355.00 pence from GBP340.00 pence.
"This would be a seamless transition in our opinion, given Coupe's similar background as King, and we also think he is a good fit for this role," Research Analyst William Mack said in a research note.
Almost two decades ago Sainsbury's was the UK's biggest supermarket operator, but was overtaken by market leader Tesco PLC, and Walmart owned Asda, leaving Sainsbury's trailing in third place. However under King, Sainsbury's has mounted something of a revival, modernising its stores, expanding into non-food products and more recently, growing through convenience stores and online sales. Its market share is now just below that of Asda.
Sainsbury profits trebled to GBP756 million in the financial year that ended in 2013 from GBP254 million in financial year that ended in 2005, while building an online grocery business worth GBP1 billion.
In its Christmas trading update, the UK's third-biggest supermarket retailer cut its sales guidance for the current financial year, warning that although it had seen customers splurge in the run-up to Christmas, October and November proved to be very slow, and the current quarter was also looking tough as consumers reign in spending after a splurge at Christmas.
It said it now expects like-for-like sales growth for the year to dip below 1%, down from its previous sales guidance of between 1% and 1.5%.
However, it still outperformed its main rivals, as it has done for the past couple of years.
Sainsbury said it had experienced its best Christmas ever, with 28 million customer transactions in the week before Christmas, up from 26 million last year. It said demand for its own-brand premium range was strong, as was online ordering and sales of general merchandise and clothes.
The group's growing convenience store business also continues to boom, and is the other driving factor behind current and future sales growth. The retailer has grown its convenience store portfolio from 262 stores at the end of its 2005 financial year, to nearly 600 Sainsbury's local. For its latest quarter, which was the 14 weeks to January 4, its convenience business reported sales growth of almost 18% in the quarter.
Since King took over, Sainsbury's annual operating profits have risen 59% to GBP829 million while annual revenues are up to about GBP24.1 billion, from GBP14.4 billion in its 2004 financial year. Its number of supermarkets has grown to 595, from 447, over the period, while convenience store numbers are up to 618, from 136.
"This was not an easy decision for me to make, and in truth it will never feel like the right time to leave," Justin King said in a statement.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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