Justin King is stepping down as chief executive (CEO) of Sainsbury’s in July, it's been announced. King’s been in charge for ten years; he’ll be replaced by Mike Coupe, current group commercial director.
He only formally told chairman David Tyler that he was stepping down this morning. The decision, he said, was entirely his own and "was not an easy one".
King, who's twice been voted the UK's most admired chief executive, has chosen to waive his entitlement to severance pay of £1.7m.
He will stand down at the supermarket’s AGM on 9 July, with Coupe continuing as group commercial director and CEO designate in the interim.
In addition to refusing the £1.7m (175 per cent of his base salary), King won’t receive an annual bonus or share award for 2014/15 or further awards under a long-term share award plan.
He will, however, be eligible for a bonus award and share-based inventive for 2013/14, subject to performance, said the supermarket.
Tyler described King as an "exceptional leader" who has reshaped the store: "He leaves a lasting legacy, with the company stronger than ever." Profits have trebled since King arrived on the scene.
When it came to Coupe, Tyler said he is an "outstanding candidate", who's spent over ten years with Sainsbury's.
At the beginning of January Sainsbury’s cut its sales forecast for the full year, warning that customers will spend with caution over the first few months of the year. And despite seeing a record number of transactions in the run-up to Christmas, the supermarket expects full-year growth of just one per cent.
But speaking today, King said that the only way for the business is up, thanking his 157,000 colleagues for their "amazing efforts".
Back in September, King told City A.M. that, despite rumours that he was soon to leave, the supermarket's retention of headhunters Egon Zehnder to prepare for his departure was just a sign of a well-prepared company.
In a call this morning, he told reporters he doesn’t have another job lined up but that he is still young enough to take on something else.
Rumours are circulating on where King might go next - if he doesn’t decide to retire. For over a year there have been whispers that he’s interested in replacing Bernie Ecclestone at Formula One. There’s also the possibility he could move to another retailer, although his contract has a non-compete cause - meaning he can’t join a rival group for 12 months after leaving.
King stressed today that he's been "100 per cent focused on his job", adding that he will "consider the opportunities as and when they do arise."
In a note on the announcement, Shore Capital said it believes shareholders will be disappointed by the news, and that King deserves congratulations and "considerable credit" for his delivery of stabilisation and solid growth. Shares dropped over three per cent on the news this morning which, it said, it a glow for any exiting CEO.
On Coupe, Shore Capital is also positive, stating that he represents continuity for the store:
We believe that Mr. Coupe has been very effective in his commercial role, proving to be astute to the market conditions and extolling the virtues of Sainsbury’s offer in challenging times to its customers.
No doubt Mr. Coupe will become his own man and we’ll watch and wait to see how the business’ strategy evolves thereafter.
S&P Capital IQ Equity Research has raised its recommendation in Sainsbury’s from “hold” to “sell”, increasing its 12-month target price from 340p to 355p.