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Sainsbury’s chief turns ‘cook for a fiver’ into £5 million bonus
13.05.09
Sainsbury's chief executive Justin King is in line for a £5 million bonus this year after promising to feed customers for a fiver.
The company today unveiled annual profits of £543 million — a rise of 11 per cent. It is the fourth year running Mr King has wowed the City.
He is entitled to cash and shares for meeting performance targets that seemed onerous when they were set on his arrival in 2004. At that point Sainsbury's was widely seen as having lost its way under previous boss Sir Peter Davis. It was also expected to suffer in the recession as middle class shoppers deserted it for cheaper alternatives. Instead, through marketing deals with Jamie Oliver and initiatives such as “Feed Your Family For a Fiver”, Mr King expanded the customer base.
As well as hiring Oliver, Sainsbury's took Tesco head on with a range of budget own-brand goods, while keeping its reputation for freshness and quality, which lured in shoppers from Waitrose. Mr King, 47, defended his bonus payments. “I'm not a banker,” he said, adding: “I understand why people might think this is an odd time to be getting a bonus, but it has been earned as part of a long- term incentive deal. It is conspicuously attached to success.”
He pointed out that all 120,000 staff will share a bonus pot of £60 million. Most of his bonus is in shares, but Mr King is entitled to sell them for cash whenever he wishes.
There is persistent speculation that he will be poached to lead Marks & Spencer when Sir Stuart Rose steps down. Mr King insists he is not looking to move on.
“Far from it. I'm going to be talking today about how much growth potential we have got,” he said.
The profits, which come on the back of a six per cent rise in sales in the 12 months to the end of March to £20.4 billion, allow Sainsbury's to ratchet up the dividend.
Shareholders will get 13.2p for each share they hold, a rise of 10 per cent which takes the payout to £231 million. A quarter of that goes to the Qatari royal family which has built up a 25 per cent stake in the company.
The Qataris have toyed with a takeover bid in the past and could one day make a formal offer.
Sainsbury's is valued by the stockmarket at almost £6 billion.
Sir Philip Hampton, the chairman, praised the performance. “This is another good set of results. Sainsbury's is a robust business with a strong financial position,” he said.
He is thought to be close to stepping down to concentrate on his other role as chairman of Royal Bank of Scotland.
Sainsbury's was founded in Drury Lane 140 years ago on the principle of helping the poor have a better diet.
Reader views (2)
I personally feel that paying someone a £5 million Bonus is obscene. There is people out there who are hungry.
- Stan White, leeds
The reason that their profits are rising is that they have drastically reduced staff numbers and cut the working hours of those remaining. The £5m would be better spent on paying more staff.
- Patrick, Dalston
