Sainsbury points to signs of recovery

Sainsbury's claimed to have "turned the corner" in the supermarket battle with arch rival Tesco yesterday though it admitted that regaining the number one position in UK food retailing was no longer a realistic short or medium-term ambition.

The comments came as Sainsbury's reported a collapse in pre-tax profits to pounds 609m, in line with its calamitous profits warning in January which forced the shares close to their lowest level for five years.

However, Dino Adriano, chief executive, pointed to encouraging sales figures which showed same stores sales up 4.2 per cent in current trading, as evidence of a gradual Sainsbury's fight back.

"I think these figures are pretty convincing. It does represent a beginning and I think we are turning the corner. Tesco is still ahead but the gap is narrowing."

He said that overtaking Tesco, which now has a market share of 15 per cent compared with Sainsbury's 12.6 per cent, was not a priority. "There are other measures of being top. Being the biggest is not necessarily consistent with being the best." He said the group planned to base its revival on highlighting the distinctions between Sainsbury's and its rivals and keeping a tight rein on costs.

Sainsbury's figures received a positive reception in the City where the shares edged 3p higher to 349p.

Mike Dennis of NatWest Securities said: "The City can see more focus from the management and more emphasis on internal targets. But it will take a another one or two set of results before we can be sure of progress."

Mr Adriano said Sainsbury's involvement in Andrew Regan's abortive bid for the Co-op would not damage its reputation. He said Sainsbury's, which was interested in acquiring some Co-op stores, only received lists of stores and no confidential information. Chairman David Sainsbury has since contacted the CWS chief executive Graham Melmoth to explain the situation.

Investment column, page 22