Sir Peter Davis: Sainsbury's chief checks out on a low note

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The Independent Online

For Sir Peter Davis, yesterday was his very own Black Friday. His last working day as chief executive of J Sainsbury saw £400m wiped off the value of the supermarket group he was hired to turn round after a profit warning knocked the shares virtually back to the level they were when he took over.

For Sir Peter Davis, yesterday was his very own Black Friday. His last working day as chief executive of J Sainsbury saw £400m wiped off the value of the supermarket group he was hired to turn round after a profit warning knocked the shares virtually back to the level they were when he took over.

So was Sir Peter, who from Monday becomes chairman of Britain's fastest shrinking supermarket chain, repentant? Not a bit of it. Despite spending four years in the hot seat and more than £3bn of shareholders' money on a vast restructuring programme, he says it is "too early" to conclude whether his reign was a success. Judging by the City's reaction, it was anything but.

Not so, says Sir Peter: "We've achieved an awful lot," he insists. "We've refurbished 80 per cent of our stores and have one of the most modern estates in the industry. We've completely repackaged our IT system. We've opened seven new depots in three years, four of them this year."

Besides, now isn't the time to write his corporate epitaph, he adds. "When I retire as chairman next year, then we will have had the benefit of a year of Justin King as chief executive and will see that the platform I've built has paid off." Neither, he tells me testily, is it time for personal profiles: "Not when I'm trying to step back."

Yet like it or not, Sir Peter will indeed be judged on precisely his past four years as chief executive, which yesterday ended with analysts slashing their profit expectations for the second time in three months. For the year to 27 March, the group is now forecast to make barely £675m, against expectations just 18 months ago that it would make £810m. Next year the number is far worse: pre-tax profits (before allowing for the effect of selling its US supermarkets business Shaw's) of £645m - less than the £650m it made during the year that Sir Peter took over.

For the Sainsbury family - the group's biggest investor with a 35 per cent stake - Mr King's arrival is déjà vu all over again. The group that looked like a recovery play when Sir Peter joined, is still a recovery play. The group that was then ceding ground to a resurgent Tesco is still losing market share hand over fist, this time to Asda and Wm Morrison as well. And the group that was having trouble persuading its customers that "Good Food Costs Less at Sainsbury's" is still having trouble: witness its belated attempt to invest in lower prices during the past three months that cost it 50 basis points of operating margin.

Sir Peter was claiming yesterday that as the supermarket's head chef he had prepared all of the ingredients with which Mr King could start cooking. But as a FTSE-100-company-boss virgin, Mr King's need to have a strong chairman to support him was hardly helped by Sainsbury's disastrous choice of Sir Ian Prosser as the man to replace Sir Peter.

Asked whether he felt he could have handled the decision to name Sir Ian, whose tenure as the autocratic former boss of Bass won few friends in the City, as the man to succeed him better, Sir Peter got shirty. "With hindsight, yes clearly." But he declined to accept responsibility for the choice, adding: "I was only one of six people involved. We clearly misjudged the issue which we deeply regret." As to whether the bungled move would make life much harder for British businesses seeking to recruit top non-executive boardroom talent, he claimed his role in the "Prosser affair" meant he wasn't "the right person to ask about that".

One former retail chief executive expressed doubt that Sainsbury's would ever find a suitable candidate to step in as the group's next chairman. "They want someone from the great and the good and I can't see them finding that person," he said. Indeed, many believe Mr King, the 42-year-old former head of Marks & Spencer's food business, got the job only because others somewhat older and wiser had turned it down.

Although some saw yesterday's "kitchen sinking" attempt by the company as inevitably accelerating Sir Peter's scheduled June 2005 departure, he was adamant that it would not. "Why should I [step down]?" he said. "I've made a commitment to the company. I don't see what the issue is." Sir Peter argues that staying on to become chairman in defiance of the Higgs' code of corporate governance was never something he wanted to do. "I was asked by the board and major shareholders to do it. I can be of help in settling in a new chief executive who hasn't run a big company. I can help Justin learn about Sainsbury's so he can concentrate on running it."

Of Sir Peter's relationship with the Sainsbury family - infamously behind his departure in the mid-1980s because they did not think he was chief executive material - he says it is the same as any of the group's other investors. They are "very" supportive and he contacts them as regularly, once every three to six months, as he does any of the company's shareholders. Indeed, it is the family's support that has been Sir Peter's biggest crutch since it swung round to backing him ahead of his appointment as chief executive. For with the family's backing, as the group's biggest investor, he can claim, truthfully, to have the support of his shareholder base.

Yesterday's trading statement left him in dire need of a decent fan base. The fourth quarter like-for-like sales decline of 0.9 per cent at Sainsbury's compared with a near double-digit sales rise at Morrison's. And its 0.2 per cent fall in full-year like-for-like sales came during a year that pundits unanimously agree saw the most benign backdrop for food retailers for more than a decade.

Sir Peter, who just last October had promised that the second half of 2004 would be better than the first, now says: "We are in for a difficult market for the next 12 months because of the competitive nature of the market." It was misjudging the extent of the competition that proved the group's downfall during its final quarter.

As for when things would improve, Sir Peter again opted to pass the buck yesterday: "That's for the new chief executive to say."

A Sainsbury's man through and through before leaving in disgust when he realised the top job was beyond his grasp in the mid-1980s, Sir Peter was lured back by Sir George Bull, who yesterday retired as chairman. For 14 years Sir Peter was airbrushed out of Sainsbury's history, never once being invited back to attend an annual meeting or a former directors' shindig.

Yet if the takeover rumours that periodically cause the chain's share price to spike ever come to fruition, Sir Peter could go down in history as the man who helped the Sainsbury's name to disappear.