Justin King quits as Sainsbury chief with margins under pressure

Justin King steps down having taken J Sainsbury from a troubled grocer to one of Britain’s best performing retailers.

The former head of M&S’s food division was appointed chief executive on March 29 2004, when the supermarket chain was reeling from a failed turnround by his predecessor Sir Peter Davis.

It was grappling with logistics problems and had lost touch with customers. On the day that Sir Peter bowed out, Sainsbury warned on profits.

Mr King has focused on getting the retailing basics right and reconnecting with shoppers.

The group’s marketing messages have been consistently in tune with customers’ needs, particularly during the downturn. It has focused on “value for values”, making the point that just because consumers are under pressure does not mean they want to compromise on quality.

This has helped Sainsbury to consistently expand sales during the downturn.

But if there is one issue that the bears can seize on during Mr King’s tenure, it is that Sainsbury’s profits have not risen as spectacularly as its sales.

True, Sainsbury under Mr King avoided the profit warning that Tesco suffered, and the consistent downgrades to profit seen at rival Wm Morrison, but pre-tax profit last year at £756m compared with about £670m when Mr King inherited the business.

When Mr King raised £445m from investors in 2009 to expand the chain, he pledged to increase the operating margin – traditionally about half that of Tesco’s – by 10-20 basis points. However, this has not been achieved.

This is despite Sainsbury investing heavily in new stores – to the tune of about £1bn a year – and with Tesco struggling to regain its poise and Morrison floundering.

Speculation has been mounting over Mr King’s position at Sainsbury for the past 18 months, and he has been linked to the role of chief executive of Formula 1.

In a recent interview with the Financial Times, he acknowledged that approaching his 10-year anniversary he was “closer to the end of my time in Sainsbury’s than I am to the start”.

He said that when the time was right to hand over the business to others, he would make that decision, “but that time’s not now”.