Those doing their food shopping this weekend might not care, but for the City, last Wednesday's announcement of a new chief executive at J Sainsbury was a big deal. The supermarket chain is desperately trying to find its way again in the grossly competitive food market, and a mammoth task awaits the newly appointed Justin King. The UK's former number one supermarket has slipped down the rankings to third place as rivals have latched on to changing consumer demands and left Sainsbury's in their wake. And with a potential takeover of Safeway by Wm Morrison in the offing, Sainsbury's faces the unenviable prospect of slipping yet further.
"I don't underestimate the size of the challenge facing Justin King," says Richard Hyman, chairman of retail consultancy Verdict. "The recent figures have been very disappointing and have illustrated just how good the others are - and just how difficult it is to keep pace with them."
The 42-year-old Mr King started his career in marketing at PepsiCo and Mars before progressing to Asda, where he was put in charge of larger supermarkets. From there, he joined Marks & Spencer as head of the food division in 2001 and was elected to the board last July. From March 2004, his curriculum vitae will be complete when he becomes chief executive of a FTSE 100 stalwart.
Mr King brings two elements to the Sainsbury's party: the high-volume non-food strengths of Asda and the top-end luxury of M&S food. Which is why the current chief executive, Sir Peter Davis, is no doubt happy to have him join the company (contrary to corporate governance guidelines, Sir Peter is to become chairman). Last week, announcing interim figures as well as his successor, Sir Peter outlined plans for the chain he has spent three years trying to knock into shape. There will be big price cuts in the new year but it is also understood he does not want to compete on price when it comes to products such as the Taste the Difference and non-food ranges.
Sir Peter's career at Sainsbury's has been chequered. He has overhauled distribution and IT systems, introduced special offers and cut prices. Most recently, he announced a major expansion of homewares. However, that decision was seen by many as coming too late - Asda and Tesco have led the way in this area for years now - and not all industry observers are convinced price cutting is the right policy for Sainsbury's. Sales initially picked up when Sir Peter joined but have since dwindled: interim like-for-like sales were up just 0.1 per cent. Underlying profits rose 7 per cent (an indication of Sir Peter's success at stripping out costs) but the sales performance remains a worry.
The Sainsbury family, with its 35 per cent stake, supports Sir Peter, but the City has been less understanding. How Mr King deals with the institutions and manages expectations, will be all-important. As one investor says: "There's been poor management at Sainsbury's for quite some time and that has to be reversed. If the strategy is right, it will come through in the end, but no one's convinced at the moment."
But, with Sir Peter sitting at his shoulder until July 2005, how much room Mr King has to manoeuvre has yet to be seen. "It's going to be a bit of a tricky period, and I sense a bit of a fudge here," says one retail expert. "Every chief executive wants to come in and establish their own way of doing things, and if the previous incumbent is still there, surely he is going to end up stepping on toes." It is understood, however, that Mr King is currently backing Sir Peter's strategy.
That may concern some who feel Sir Peter's plans are not working, but generally the City seemed to approve of Mr King's appointment - or at least was relieved a decision has been made. The investment bank Dresdner Kleinwort Wasserstein, for example, called it "good news" and raised its recommendation from "reduce" to "hold". But Mr King is not without his detractors. Hot summers aside, M&S food sales have held up, even during the dark days before the company's turnaround under chairman Luc Vandevelde. But that, says one former colleague, is like shooting (smoked) fish in a barrel. "The food group has always managed to maintain 3 to 4 per cent like-for-like growth, and a lot of that is down to the way it operates - it's the age-old scenario of nipping into M&S on your way home."
This ex-employee also disputes Mr King's involvement with developments such as Simply Food standalone stores. "He's been very fortuitous in that he's been able to jump on the development of Simply Food, which was first talked about 10 years ago," he says. "It was also never going to be rocket science to put a shop next to Green Park Tube station and see it go like a rocket." A chief executive of a rival food retailer is equally dubious, particularly about Mr King's lack of experience in dealing with the City. "There's a danger he could get carved up," he warns.
Yet Mr King has another string to his bow. From his time at Mars and Asda, he is part of a powerful clique of executives who have snapped up top jobs. At Asda he worked under serial director Allan Leighton, while at Mars he encountered an even wider group. Mr Leighton started off there, as did the Boots boss Richard Baker; Adam Crozier (recruited by Mr Leighton to be chief executive of the Post Office); Paul Mason, former head of the discount retailer Matalan; and Sara Weller, now Sainsbury's deputy managing director.
The most interesting relationships will be with Mr Baker and Ms Weller. She was in line for the managing director's job when she was co-managing director with Stuart Mitchell, but Mr Mitchell pipped her to the post. She was then tipped for the Boots job before it went to Mr Baker.
But the most telling partnership of all could yet be with Mr Baker, who is a personal friend of Mr King. It is an open secret that Sir Peter favours a merger between Sainsbury's and Boots. The chemist has so far failed to play ball but with the two chief executives freshly installed and the best of buddies, surely now there is an outside chance Sir Peter's dream could maybe, just maybe, come true.
A much-prized job falls to the golden boy
When Justin King quit Marks & Spencer last week for J Sainsbury, his replacement marked something of a return to tradition for the retailer. Contrary to recent trends, M&S has opted for an internal candidate for the new head of food - the 36-year-old menswear boss Maurice Helfgott.
Mr Helfgott has spent his entire career at M&S and is seen as something of a golden boy. Rhys Williams, retail analyst at Seymour Pierce, says: "He has got, certainly within M&S, a very strong reputation and he knows the way the company works."
As head of menswear, Mr Helfgott scored a hit with the launch of the Blue Harbour clothes range (he once said that to get inspiration for it, he took his team to the US, hired a van, and they "took turns hanging off the roof"). Prior to that he established Ventures, a unit dedicated to new developments, including (bear in mind this was 1999) dot-com opportunities. He escaped any stigma associated with this initiative mainly because of successful bricks-and-mortar ideas, such as a deal with the catering giant Compass to have Simply Food stores at train stations.
And so Mr Helfgott has been rewarded with the food division, a seat on the board and praise from chief executive Roger Holmes, who calls him one of M&S's "brightest stars". Yet it is hardly a tough job Mr Helfgott is taking on. "As long as you have got the M&S way of thinking, the machinery is there," says Mr Williams. "It's hardly broke, let's be blunt."
Not knowing the M&S "way of thinking" is one thing Mr Helfgott could never be accused of. He joined from university as assistant merchandiser for ladies blouses and dresses before moving on to the equally glamorous job of merchandiser for men's hosiery. After that he oversaw Brooks Brothers, the US menswear chain then owned by M&S, returning to Britain after completing an MBA at Harvard Business School.
This sort of career path used to be common at M&S, which, like Sainsbury's, has been accused of not getting enough outside thinking on board. Under the current M&S chairman, Luc Vandevelde, this issue has been addressed - the new head of menswear will be recruited externally. This rule was evidently happily broken for Mr Helfgott, however, which is perhaps the biggest recommendation he has received so far.Reuse content