Weak figures raise question mark over Sainsbury's future

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J Sainsbury will admit on Thursday that it has failed to increase sales in the crucial three-month period to Christmas, casting a further pall over the future of what was once the UK's largest grocer.

A senior industry source with links to the supermarket group said that the company would report a fall in sales of up to 3 per cent, excluding petrol, when compared to the same period in 2003.

It will seal what has been a dreadful year for chief executive Justin King, who has presided over four profits warnings.

Despite the drip-drip of bad news, Sainsbury's shares have held up well on speculation that it is a takeover target.

Sainsbury's figures will come six days after Marks & Spencer was forced to reveal rotten Christmas trading figures early under new Financial Services Authority rules.

But because Sainsbury's last warned of a profits slide in October, Mr King is not expected to bring forward his announcement.

Sainsbury's is currently promoting cost cuts on 6,000 products, with a TV advertising campaign featuring Jamie Oliver. However, many analysts are sceptical about the company's prospects. "The fundamental outlook for JS still looks dark," said a report produced by Merrill Lynch last week. "Two decades of retail sales density declines still suggest to us deep brand issues."

Tomorrow, the British Retail Consortium is expected to reveal that overall December sales were 1 per cent down on the previous year. Wobbles in the housing market and higher interest rates are thought to have put off shoppers. Goldman Sachs believes that December may have seen the lowest level of volume sales growth for a decade.

In the next three weeks, a slew of retailers will reveal how they have fared over Christmas. Others thought to have fared poorly include Austin Reed, which is believed to have suffered a 10 per cent fall in sales, and WH Smith.