Just over a year on from the launch of Justin King’s turnround programme, J Sainsbury reported flat interim profits and positive like-for-likes, but was cautious about market share gains and a slowing market.

Sainsbury’s chief executive, who joined the supermarket retailer in March 2004, said: “Independent industry measures put our growth ahead of the market for the first half of the year, although market growth has slowed.”

Mr King was guarded about gains, stating that footage growth in space in the market was growing at 4 per cent, while Sainsbury’s was only increasing its footage by 2 per cent a year over the next two years. “We are unlikely to improve market share on this basis, however, sustained like-for-like sales growth is the clearest measure of health for the existing estate.”

However, it is thought that the company has benefited from difficulties at rival Wm Morrison, still struggling to digest its Safeway acquisition, which reported last month that sales in the 12 weeks to October 16 at core Morrison stores were down by 5.2 per cent. Meanwhile earlier this week Wal-Mart, which owns Asda, said sales and market share were “largely flat”.

Analysts were cautious about Wedndesday’s results. David McCarthy at Citigroup said in a research note: “So far management has focused on sales improvements at any cost, and the fixing of some of the basics, like availability, have definitely helped. There have been definite improvements in Sainsbury sales, including some easy wins, but it is still far too early to call this a recovery.”

Like-for-like sales at Sainsbury’s for the 28-week period ended October 8 were up by 2.1 per cent, excluding petrol.

Underlying pre-tax profit, which stripped out the £417m cost in the comparable period of 2004 of its business transformation programme, was flat at £118m, compared with £117m last time, on sales which rose by 13.5 per cent to £8.82bn.

Including these costs, the company moved into a profit of £87m compared with a loss last time of £292m.

Group profits were affected by a loss at Sainbury’s bank of £5m. Sainsbury’s core retail operating profit improved by 13.5 per cent to £168m, on an underlying basis, which it said reflected the higher sales volume and a 0.1 percentage point improvement in operating margin to 1.9 per cent for the half year.

Earnings per share were 3.5p compared with 1.9p last time. The company made an operating profit of £142m, compared with a loss last time of £253m.

The board is recommending an interim dividend of 2.15p per share at the same level as last time.

Sainsbury’s, like other supermarkets, faces the prospect of regulatory scrutiny, after the Office of Fair Trading said last month it would reconsider its refusal to investigate the convenience store sector. The watchdog had resisted calls from high street shopkeepers who say predatory pricing by Tesco and other large supermarket groups had killed off thousands of indepedent grocers.

Mr King said that on Wednesday he saw a case for looking at the current planning regime, which currently does not consider competition issues. This means, effectively, that a single company could get permission to build stores in three locations in the same town, whereas Mr King argues that it would be better for consumers if there was more of a choice. “It is an anomaly that planning is outside current competition rules.”

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