Sainsbury job fears stack up

HUNDREDS of Sainsbury head office jobs are likely to go once new chief Justin King gets his feet under the table. Rival executives and analysts believe the retailer is hugely inefficient despite having spent more than £2bn on upgrading its IT and distribution systems.

King is under pressure to stem central costs to fund price cuts in the stores. Despite years of investment, last year's sales per square foot were lower than five years ago.

The new chief, who started this week, does not want to rock the boat straight away, but a shake-up is inevitable. Reports are already circulating that supermarket managing director Stuart Mitchell may be demoted as King takes direct control.

Middle-tier managers are vulnerable. Sainsbury is a much smaller beast than when Sir Peter Davis took the helm in 2000. It has sold Homebase, dropped to third place among UK supermarkets behind Tesco and Asda and is selling its US business Shaws.

Sainsbury points out that it has already cut its 4,000 head office staff to about 3,200 in the past year. Retail giant Tesco employs 5,000 HQ staff but it has more than 300,000 employees and massive overseas operations, Sainsbury's total workforce is 145,000.

Sainsbury says: 'While there are always opportunities to look at how you can be more efficient, the priority is trading the business harder.'

King faces an uphill task, though he can always tout the group as a takeover target. He is not badly off, having just been awarded £700,000 of restricted shares and options over another 516,000 shares. Merrill Lynch reckons there is more gloom to come. It urges investors to sell the shares (up 2 1/2p to 266 1/4p).

Merrill forecasts profits for the year ending this month will fall from £695m to £672m and drop to £471m in the coming year.