Sainsbury's in turmoil

Sainsbury's today admitted it was heading for the first loss in its 135-year history.

It said shoppers had too often been unable to find the goods they wanted because they were simply not in stock - despite ?3 billion spent on trying to improve its supply chain.

In a lengthy "back to basics" statement to the stock market today, chief executive Justin King said: "Customers have too frequently been unable to complete their shop, and availability levels are currently worse than before major changes were made."

The statement admitted shop floor morale was poor and customers were increasingly disenchanted, leading to a huge loss of business.

This year has been the worst in the company's history, with four profit warnings, the sacking of former chief executive Sir Peter Davis and the success of rival Tesco.

Sainsbury's said underlying profits this year will only reach about ?250 million. Tesco expects some ?2 billion. However, Sainsbury's will also see a write-off of around ?550 million, plunging the company into the red for the first time since the original shop was opened in Drury Lane in 1869. The statement also reveals that 131 supermarkets have received no investment for many years, despite accounting for 20 per cent of sales and being used by three million customers.

It added: "Insufficient attention and investment has been made in the customer offer leading to declining market share." Today Mr King unveiled a turnaround plan for the firm - which has 461 supermarke t s across Britain - entitled "Making Sainsbury's Great Again".

It will see an overhaul of the group's complex structure with seven Local stores in London closing down. The upmarket Bluebird branch on Kings Road, Chelsea - opened with Sir Terence Conran - will also close.

Sainsbury's will recruit 3,000 new shop-floor staff to try and improve service to customers, while cutting 750 head office jobs.

It will halve the dividend to shareholders to save money, and a further £400 million of savings are planned. There will also be a new bonus system for staff.

The 131 neglected stores will now be a top priority and will all be refurbished over the next two years.

Mr King said he hoped to improve sales by £2.5 billion over the next three years to try and claw back some of the ground lost to Tesco, Asda and

William Morrison.

S a i n s bu r y ' s shareholde r s will hope today's review marks a turning point for a group that was Britain's biggest grocer until 1995.

Since then it has been overtaken-first by Tesco and, more recently, by Asda.

It is now in danger of losing third place to the combined William Morrison/Safeway group.

The Sainsbury's family still own 38 per cent of the company's shares but have not been represented on the board since the late Nineties.