Sainsbury's declares price war

SAINSBURY'S chief executive Justin King has vowed to keep prices 'below the industry average', as data reveals that the supermarket chain was cheaper than Morrisons last month.

His comments came as it emerged that King earned £1.1m last year, including a bonus of £385,000, even though profits crashed from £610m to £15m.

This was a reward for recruiting a new team and cutting costs and prices. On 1 June, he was also given shares worth £542,000, as part of his signing on fee.

King says nearly 8,000 prices have been reduced over the last 18 months. 'We've gone a long way to close the gap but we've still got lots to do,' he says.

On average, Sainsbury's is 'slightly cheaper than Morrisons and slightly more expensive than Tesco and Asda'. A Grocer magazine survey claims that Sainsbury's has been cheaper than the 'industry average' for the past two weeks and King pledges to retain this position.

Since last July, the supermarket has lowered prices by 2.5% - Asda prices have risen 3.3%, Morrisons 3.5% and Tesco's are up 1.5%.

The annual report confirms King's ousted predecessor Sir Peter Davis was paid £3.3m last year, including £3m compensation. His salary is pensionable and Sainsbury will pay him £145,000 a year for that.

Davis has a pension pot worth £2.6m as well as 3m share options. Ex-supermarket boss Stuart Mitchell, who was forced out just after King became chief executive, got £1m, including a £790,000 payoff.

Finance director Roger Matthews saw his pay rise to £690,000 including a £188,000 bonus. Incoming finance chief Darren Shapland will get basic pay of £400,000 and a £300,000 'golden hello'.

King's basic salary has been increased by 3.7% to £700,000. He plans to buy 118,754 shares under the new long-term bonus plan, which could pay out shares currently worth £4.7m.

In a separate development, speculation of a boardroom coup at William Morrison is mounting. Weekend reports suggested that the company is planning to replace chief executive Bob Stott after five profit warnings.

The reports, not denied by the company, come as headhunters search for up to four non-executive directors. The need for new non-executives reflects City concern about the make-up of the current board. Morrisons' credibility in the Square Mile has been damaged by the recent profit warnings, all of which stem from its £3bn takeover of Safeway last year.