Davis in firing line at Sainsbury

SAINSBURY boss Sir Peter Davis faces a backlash from shareholders on Wednesday unless he provides evidence that the supermarket group is gaining ground on its arch rival Tesco.

He is expected to tell the annual general meeting that sales have grown by a disappointing 1/2%-1% in the opening weeks of the year - a dismal return on the billions spent sprucing up the stores.

The chief executive will deflect criticism by promising more cost savings and initiatives to get customers back into the stores.

Investors are unlikely to be convinced that Davis is capable of engineering the desperately needed turnround. Already on £750,000 a year, he has left himself vulnerable to attack by negotiating a package of 1.5m free shares if he meets certain targets - including finding a new chief executive. Davis is due to step up to chairman next March. One analyst said: 'He needs to pull something out of the hat and fast, but I can't see it coming.'

Broker CSFB remains 'sceptical' that Sainsbury can find cost savings and improve sales growth. Phil Dorgan at broker WestLB Panmure is fiercely critical of the Davis regime. He claims the gap with Tesco has widened since March 2000 when Davis - a former Sainsbury executive - was headhunted back to rebuild its fortunes.

Dorgan said: 'For every £1 Sainsbury has increased UK sales, Tesco has delivered £2.34. For every £1 Sainsbury lifted UK operating profits, Tesco has improved by £8.03. Things are getting worse.' Dorgan says Sainsbury should unlock the value of its £6bn property portfolio and return the cash to shareholders.

Sainsbury shares are back below the level when Davis joined, partly due to the market.