Davis returns to the checkouts; Sainsbury appoints new chief executive

IN a move which initially stunned the City, the troubled JSainsbury supermarket giant has hired the Prudential chief executiveSir Peter Davis to try to revive its flagging fortunes.

He is replacing Dino Adriano who stays on as chief executiveuntil February 29 and will resign as an executive director at theend of May.

In the interregnum, he will hand over his currentresponsibilities for Homebase, the US supermarkets and theSainsbury's Bank.

The Adriano departure comes as no surprise as it was writ largelast October when David Bremner was put in charge of the core

UK supermarket operations and Adriano was side-lined into lookingafter strategy.

He will depart with a pay-off of around #1m after 35 years withthe grocers - he earned a basic #538,000 last year.

Sir Peter had been at Sainsbury for a decade as an executivedirector but left in 1986 as he felt he would not be promoted withthe family then firmly in the top management seats.

Yesterday the family said it that it has given him their "strongsupport".

Although Sainsbury is valued much less than the #21.4bnPrudential, up 22p to 1099p, by the market, Sir Peter will see hissalary rise from #600,000 to #750,000 with also the prospect of a50% bonus.

But the real attraction is share options which will be equivalentto eight times annual salary at #6m.

Sir Peter, 58, went off to become chief executive and thenchairman of the Reed International media group before joining thePru.

He transformed the huge insurance group which had lost its waythrough pensions mis-selling and heavy bureaucracy.

Sir Peter slashed employment numbers, partly through ending thedoor-to-door insurance premium collectors but also went on theexpansion trail.

His biggest purchases were Scottish Amicable and last year, theM&G unit trust group.

The most controversial Davis decision was to launch the EggInternet bank in 1998.

He was due to become Prudential's part-time chairman in May to besucceeded by Jonathan Bloomer who became deputy chief executive lastMay.

Marconi chairman Sir Roger Hurn will now take on the Prudentialchairmanship.

Market reaction was highly positive.

Sainsbury's shares jumped 15p to 319.5p for a #6.15bn marketcapitalisation.

That was despite a not unexpected profits warning whichaccompanied the trading for the 12 weeks to January 8 and wasbrought forward from next Wednesday.

Chairman Sir George Bull said that full-year profits would be atthe lower end of City expectations at between #560m and #610m beforetax, exceptional costs of #60m largely relating to redundancies andreorganisation and property profits.

The shortfall is due to higher operating costs as Sainsburybegins the long overdue process of updating its UK stores as well ashigher expenditure on distribution and employee wages.

The UK supermarkets increased total sales in the third quarter by4% and the like-for-like by 2% although these are still 0.3% down inthe year to date.

The Homebase DIY subsidiary had an excellent experience withoverall turnover 17.3% up and the like-for-like figure showing a13.6% improvement.

Philip Dorgan at WestLB Panmure said like-for-like sales at thesupermarkets was better than he had expected. He added that he isnow more positive on the stock as one of the big negatives had beenremoved in that Sir Peter will bring in a fresh perspective that waslacking under Adriano.

But Sainsbury still has a huge amount to do, Dorgan concluded.

Bradford-based Wm Morrison supermarket group underlined thepressures that Sainsbury is having to confront if it wants to re-establish itself.

The 101-store group said that its sales in the last seven weekshad shown a 15.1% leap as it continued to attract customer loyaltythrough having the lowest prices of any of the major chains andwithout frills such as loyalty cards.

Shares in Marks & Spencer went ahead 15p to 331.5p, while thoseof Tesco edged ahead 1.5p to 169p on speculation that Britain'sbiggest super- market would make an agreed offer for the stumblingclothing giant.

But a source said that it was unlikely Tesco would want to moveuntil the Competition Commission had concluded its industryinvestigation.

By scooping up the Marks & Spencer 4% food market share, Tescowould then control about a fifth of the market and that would beseen as a red rag to a bull by the Government.