Grocery King passes crown
J SAINSBURY saw more than £160m wiped from its stock market value after chief executive Justin King announced he will step down in July to be replaced by commercial director Mike Coupe.
The shares fell 10p to 346.70p amid fears Coupe is taking up the reins at a pivotal time for the business.
All four of the big grocers have seen a slowdown in sales growth and Sainsbury’s disappointed with its Christmas trading, warning it will miss its annual sales targets despite being the strongest performing supermarket chain.
While King leaves the business in good shape, having increased sales by 67pc and operating profit 59pc according to research firm IGD, Coupe said conditions on the High Street are the toughest he has seen in 30 years.
‘This is the most challenging trading environment we have seen,’ he said. ‘But I am confident of doing a great job and it is business as usual. The strategy is successful and we will continue on that path.’
The pair have worked together over 17 of the past 20 years, having met as directors of Wal-Mart owned Asda. Coupe is widely seen as one of the architects of Sainsbury’s current strategy, which has focused on delivering a mix of low- cost own-brand products alongside premium ranges.
But with shoppers having a lower disposable income than ever before, it is the grocers sitting in the middle of the market that are suffering the most. Low- cost rivals Aldi and Lidl have been gaining market share, along with upmarket grocer Waitrose.
Coupe has been busy expanding smaller, high-growth convenience formats, which now number 618, up from 136 ten years ago, and Sainsbury’s online grocery store.
Sam Hart, an analyst at broker Charles Stanley, warned that there is often a threat from regime change. ‘Transition to a new chief executive always presents risks,’ he said. ‘But our expectation is that strategy will be evolutionary rather than revolutionary under Coupe.
‘Bears on the company may argue he [King] is getting out at a time when the outlook for the industry appears particularly challenging, and that he does not want to have his reputation tarnished by any deterioration in Sainsbury’s future financial performance.’
However King’s future share awards from Sainsbury’s remain closely linked to the firm’s performance. He will remain eligible for an annual bonus and deferred share award for 2013/14, subject to performance over this period.
Assuming targets are met, King will walk away with £1.7m from a long-term incentive scheme and, at yesterday’s closing share price, stock worth £2.8m.
A physics graduate from Birmingham University, he was a Unilever graduate trainee and has worked at Tesco, Asda and Iceland-owner Big Food Group, before joining Sainsbury’s in October 2004.
David McCarthy, head of consumer retail research at HSBC, says the next ten years are likely to be tougher for Coupe.
‘The industry has fundamentally changed because consumers have structurally changed the way they shop,’ he said. ‘Sainsbury has out- performed Tesco and Morrisons, but its core estate is still in decline, with underlying like-for-like losses.
‘We do not expect much strategic change in the short-term under Mike Coupe, but we believe there should be.’
He will not face any immediate competition from King who has a 12-month exclusion clause preventing him from joining a rival grocer.
There was renewed speculation yesterday that Qatar’s sovereign wealth fund, which is a major investor in the stock, was eyeing the firm again.