Sainsbury swaps food for politics

THE CITY reacted with astonishment yesterday to the news that Lord Sainsbury of Turville is to retire from the Sainsbury's supermarket business in September to pursue a career as a working peer. The decision will see the Sainsbury's family relinquish leadership of the business after almost 130 years. Dino Adriano will remain as chief executive while George Bull, head of the Diageo drinks group, has been appointed non-executive chairman.

Lord Sainsbury said he felt the ground had been well prepared for his departure after six years at the helm. He said he had been required to make the decision last October as to whether or not he wanted to be a working peer and added that the Sainsbury's family, which controls 40 per cent of the shares, would remain "committed shareholders".

However, City analysts said they were surprised by the timing. One said: "I certainly had no idea this was on the horizon. You could look at the decision to promote Dino Adriano to chief executive a while back as trailing this but I had expected the move to be some years away."

Sainsbury's shares closed 22.5p higher at 502.5p as the market reacted positively to the news that the family is to take a back seat. Andrew Marsh, food retail analyst at Charterhouse Tilney said: "The market has viewed the news as positive. For a long time there has been a perception that the family involvement has held back the company strategy. Now we could see a shift."

Another said the changes could include less emphasis on America, where results have been poor. "It would be an opportunity to review the business and, if things do not improve there, I would not be surprised if they decide to sell it," the analyst said.

However, Clive Vaughan at Verdict, the retail consultants, played down the significance of the change at the top. "I don't think it matters that much. Sainsbury's is an enormous business and a public company. Having one or more Sainsburys on the board is just a relic of history. What is left is a very capable management team."

Lord Sainsbury has been under pressure for several years as the company lost ground to Tesco, was forced into a U-turn on loyalty cards and issued its first profits warning in 25 years as a public company.

Lord Sainsbury expressed some sadness about the severing of the family tie but said he was looking forward to his new role as chairman of the University for Industry, a new Government initiative to help people who leave school without the prospect further education. "There is a sense of excitement at the prospect of something new." He pointed out the growth in the business, saying when he joined in 1963 it had profits of pounds 2m on sales of pounds 79m. At that time, the head office in Stamford Street on London's South Bank was also the distribution centre and a cheese shop. Now Sainsbury's has profits of pounds 728m on sales of pounds 15.5bn. "To have played a part in that growth has been tremendous," he said.

Although he has often looked uncomfortable in the corporate spotlight he denied he had felt driven to join the family business by a sense of duty. "You have to be a bit wet not to take up the challenge. To have that kind of opportunity and to turn it down would seem rather odd."

He continued: "I would not have done this if a good management team had not been in place. What is important is that the value and standards of Sainsbury's will continue."

He was speaking as Sainsbury's reported a 12 per cent increase in pre- tax profits to pounds 728m. Like-for-like sales rose by 3.4 per cent in the year and are up by 2.8 per cent in current trading.

Sainsbury's said its market share increased from 12.7 per cent to 12.9 per cent in the year. However, it still lags Tesco by some distance and its sales growth is far slower.

The company announced plans to create 5,000 new jobs this year with 18 new stores openings. These will include three new smaller-format stores under the name Sainsbury's Local. The first of these branches, which follow the success of Tesco Metro, will open on the Fulham Palace Road in London later this year.

Homebase, the DIY chain, saw operating profits triple though the kitchens business lost pounds 5m in the year. In the United States, profits were hit by the impact of a strike and losses in Connecticut.

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