CEO King commits to Sainsbury's after beating forecasts
LONDON (Reuters) - Justin King dismissed rumors he planned to quit as head of J Sainsbury (SBRY.L), promising to steer Britain's third-biggest grocer through the challenges of the next few years after another set of forecast-beating results.
Speaking after the group posted its eighth straight rise in annual profit on the back of a 10-year high in market share, King told Sky News that he did not have any immediate plans to move on.
"I consider myself still to be a relatively young man, so I've got a few more years in Sainsbury's in me yet," he said, before repeatedly refusing at a later news conference to be drawn on any more details.
The comments, following mounting speculation that he could move on after nine years as chief executive, came as the group posted a 6.2 percent rise in annual profit and higher margins, mainly due to a strong online and convenience store performance.
King said the group saw no near-term change in the economic situation in Britain, suggesting the next year could be tough for the broader retail sector, which has been hit hard as consumers grapple with high inflation and meager wage growth.
But Sainsbury's, whose market share is 16.8 percent, has stood out against rivals, benefitting from the success of its "Brand Match" pricing initiative, growing own-brand sales and a big push into non-food areas like clothing and home accessories, resulting in 33 consecutive quarters of underlying sales growth.
Unlike rivals Tesco (TSCO.L) and Asda (WMT.N) it has also not been implicated in the horsemeat scandal, which broke in January when horse DNA was found in frozen burgers in British supermarkets, with none of its products testing positive.
King said the group's strategy and understanding of its customers meant it was well-positioned for growth, although its 2013/14 forecast for like-for-like sales up between 1 and 1.5 percent disappointed some analysts.
Online sales and local convenience stores are the two fastest growing areas for Britain's supermarkets as consumers turn to the internet and local shops to avoid the high fuel prices incurred by trips to town centers and out-of-town malls.
Sainsbury's convenience store business is growing at over 18 percent year-on-year, driven by a combination of new selling space and like-for-like sales growth, while online grocery sales are increasing nearly 20 percent year-on-year.
"Justin King has led Sainsbury to another year of steady progression in still challenging economic and sector conditions," Shore Capital analyst Clive Black said.
"For that the 'grandfather' of the sector and his team now deserve considerable credit. Sainsbury has developed into a materially more resilient business than was the case when he took control of the reins."
The group, founded in 1869, has also benefited from problems at market leader Tesco, which has had to retrench and rebuild after posting a profit fall for the first time in 20 years.
Some analysts said Sainsbury's was vulnerable to a recovery at the retail giant, which has invested 1 billion pounds in a revival plan following a dismal Christmas in 2011 which also led to a first profit warning in two decades.
In April, Tesco wrote down the value of its property portfolio after deciding not to develop 100 sites. King noted Tesco's property portfolio was very different to its own, which would add to its earnings, and any Tesco pull back was good for Sainsbury's.
Total sales were up 4.6 percent to 25.6 billion pounds, or up 1.8 percent on a like-for-like basis, which excludes the impact of fuel, in the year to March 16.
The group, which trails Tesco and Wal-Mart's Asda by annual sales, said its profit before tax and one-off items was 756 million pounds ($1.2 billion), at the top end of a range of forecasts and above consensus of 746 million pounds.
Shares in the group were down 4 percent by 0944 ET, against a flat FTSE 100, after they rose 14 percent since the start of the year, with analysts attributing the fall to the previous strong rally and a note of caution over the outlook. Analysts are evenly divided over the stock, with 11 of 25 brokers having a Hold rating as they believe it is fully valued compared with peers.
The robust performance helped the group to increase the full-year dividend by 3.7 percent to 16.7 pence.
Sainsbury's said the dividend payout would be covered by earnings at a ratio of 1.83 times, up from 1.75 times in the previous year. It said it maintained its target of increasing the dividend year-on-year and continued to plan to build cover to two times over the medium term.
Sainsbury's also said it had bought out Lloyds Banking Group's (LLOY.L) 50 percent stake in Sainsbury Bank For 248 million pounds.
(Editing by James Davey and Helen Massy-Beresford)