Justin and Jamie jumpstart the grocer that had stalled

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The Independent Online

Fast forward to this Friday, when the supermarket chain unveils its second-quarter sales, and a different story is emerging - albeit one that still includes a certain mockney celebrity chef.

Morgan Stanley, for example, is predicting sales growth of 4.9 per cent for the three months, or 1.5 per cent on an underlying basis (excluding petrol). "This should mirror J Sainsbury's improving market share momentum in the quarter," the research note continues.

It has been quite a year for Justin King, Marks & Spencer's former head of food who took over as chief executive at Sainsbury's in March 2004. As his tenure got under way, the group warned on profits while shareholder anger grew over the £3m payoff to its outgoing boss, Sir Peter Davis. There then followed a messy set of results, where more than £500m was written off.

Yet Mr King was also able to lay out his plans to revive the business. And, nearly a year later, things appear to be working. The latest grocery data from research group TNS reported above-average growth at the chain in the 12 weeks to 11 September, taking its market share to 15.7 per cent.

"He is turning that business around and he is doing it in a way that's sustainable," says Richard Hyman, the chairman of retail research group Verdict. "He is addressing a lot of Sainsbury's core operational issues, and marketing issues as well. He is getting it together on pricing. Availability, which was a problem, has improved greatly and the product range looks much better."

Long term, the chain knows it can't compete with Tesco and Asda on price - it sees itself as closer to Waitrose than to the cheap-and-cheerful brigade - but there can be little doubt that lowering prices will not have hurt.

Marketing and branding have also been shaken up, but one of the most important changes came last month when the automated depots finally started working properly.

These stock-control systems had been a big problem for Sainsbury's. The brainchild of Sir Peter, they had failed to operate as planned, meaning shelves were left empty. The costs involved in running them properly will affect profits in the short term, but at least shoppers can now get what they came for.

There have been internal changes too. The old guard has largely been replaced and the chairman, Philip Hampton, is seen as a tough leader who will stand for no nonsense.

Mr King has also attempted to shake up the group's notoriously bureaucratic culture. "It had a view of the world rooted in the 1980s, when it was the Rolls-Royce that everyone set the standard by," says Mr Hyman. "That's all history and you can't trade on past performance." Insiders say Mr King has also won over staff, in particular those on the shop floor, in a way Sir Peter never did.

Yet before we all drop our Tesco bags and flock to Sainsbury's, it should be remembered that Mr King is not out of the woods.

For a start, the grocer has been boosted by weak performance at some rivals. "It is being helped by Morrisons [Wm Morrison, which is struggling after its purchase of Safeway] and Asda," argues Fitch retail analyst Jonathan Pitkanen. "The traditional Safeway customer is similar to the traditional Sainsbury's customer and, because of that, it should be doing OK, because some people are just disenchanted with the new Morrisons format and are drifting away.

"It is also doing well because it had been doing so badly. It is coming off such a low base."

Mr Pitkanen believes Sir Ken Morrison will not straighten out his chain for another year. However, he adds: "[Asda's boss] Andy Bond is quite new to the job, but if he gets his skates on and does something, then Sainsbury's will be in trouble again."

And then there is Tesco . The chain's growth appears unstoppable, and its landbank of potential sites is one that rivals can only look at in envy. As Mr Pitkanen notes: "Everyone is going to be looking a bit crummy against Tesco."

Even Mr King's turnaround strategy, with its emphasis on sales before profits, could cause problems. Says one analyst: "He's said that profits are going to be poor for the next two years and, if you say that, you'd better be able to improve your sales. If you can't do that, you're really in mega trouble. I would like him to say [this week] that like-for-likes are up and so are margins, but we're not going to get that."

No doubt, the early signs are good for Mr King. The caveat is whether he can keep it up and return Sainsbury's to a semblance of its glory days by the time the three-year turnaround phase is over. It is a promising start, but it is a marathon he has undertaken and not some supermarket dash.

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