Sir Peter Davis, the chief executive of J Sainsbury, has defended the supermarket group's decision not to focus on increasing its sales amid growing City concern that the distance between the number two retailer and Tesco was widening.
Shares in Sainsbury's, which reported strong full-year figures, fell 8.5p to 256.5p after Sir Peter signalled that sales were likely to slow in the first three months of its financial year.
Sir Peter said growing the group's top line "was not our priority". He added: "We wouldn't dream of having a drive on sales until we have completed the bulk of our transformation programme, which will take at least a year." The group said it would face some tough comparisons in its first quarter, inspired by last year's World Cup and jubilee promotions.
Analysts have criticised Sainsbury for relying on cost cutting programmes to drive profit growth, warning that the group's future recovery could be in doubt. David McCarthy, at Smith Barney, said: "We would much prefer Sainsbury to have delivered profit growth via sales expansion rather than via cost-cutting - a strategy that clearly has a limited lifespan."
Sir Peter, who is one of five bidders for Safeway, said he thought it was unlikely that the competition authorities would wave through any takeover offer without significant store disposals. "The solution might be two or three parties getting together. "We'd be very happy to talk to various parties about possible combinations," he said.
The retailer reported underlying sales growth of 2.3 per cent last year. Its pre-tax profits for the year to 29 March rose 17 per cent to £667m, or 11 per cent on an underlying basis to £695m - topping analysts' expectations.