Sainsbury’s Justin King to step down
King to leave a 'lasting legacy' at supermarket, having achieved an extra 10 million customers a week between 2004 and 2014
3 February 2014
Sainsbury’s has announced Justin King has decided to step down in July 2014 after 10 years as CEO, and Mike Coupe, currently the group commercial director, will succeed him as CEO.
King is to stand down at the company’s AGM on 9 July. In the interim, Mike Coup will continue as group commercial director and CEO designate. John Rogers is to continue in his role as chief financial officer.
Speaking at a news conference to announce King’s decision last week, David Tyler, Sainsbury’s chairman David Tyler said: "Justin is a truly exceptional leader, who has reshaped Sainsbury’s during his 10 years as CEO, as well as playing a leading role in the sector and wider business world. The board thanks him for his outstanding achievements in ‘Making Sainsbury’s great again’. He leaves a lasting legacy, with the company stronger than ever.
"We are delighted to appoint a CEO of Mike’s unique talent and experience as Justin’s successor to lead the next chapter of Sainsbury’s history. No one knows Sainsbury’s – or the industry – better than Mike. He has worked hand-in-hand with Justin over the past decade and has a proven track record of success making him the natural choice to take the company forward."
King described his difficulty in deciding to leave, stating: "This was not an easy decision for me to make, and in truth it will never feel like the right time to leave a company like Sainsbury’s. It has been a privilege to have led the company for the past 10 years and I am incredibly proud of our achievements in that time. It is the 157,000 colleagues that make Sainsbury’s so special and I would like to thank them for their amazing efforts over the last decade in making Sainsbury’s great again. I am confident that under Mike’s leadership the business will go from strength to strength."
Mike Coupe, CEO designate commented: "It’s an absolute honour to be appointed as the new CEO of Sainsbury’s in this, the Company’s 145th year, and at a time when thanks to Justin’s leadership, we have been consistently outperforming the market. I very much look forward to building on that success for our customers, colleagues, suppliers and shareholders."
King’s move is widely regarded throughout the industry as a blow for Sainsbury’s, given his successful leadership between 2004 and 2014. The company’s achievements during this time include adding 10 million additional customers a week, with around 24 million transactions a week in 2014, as opposed to 14 million in April 2005. Sainsbury’s also excelled in customer service, winning 14 out of 30 Mystery Shopper awards for service and availability in 2013/14 from trade publication The Grocer.
The supermarket also achieved a £9.5 billion increase in incremental sales, from £16.1 billion in 2004/5 to £25.6 billion for 2012/13. What’s more, underlying profits almost trebled from £254 million in 2004/5 to £756 million in 2012/13. The retailer also benefitted from over £600m operational cost savings since 2008/9, with underlying operating margin up to 3.56% in 2012/13 (from 2.15% in 2004/5).
In further good news for the company its market share is continuing to grow, currently standing at 17.1% (Source: Kantar 12 weeks to 5 January)
In its press statement, Sainsbury’s revealed King will receive no annual bonus or Deferred Share Award for 2014/15, and will receive no awards under the Long-Term Incentive Plan ("LTIP" – known as Value Builder or Future Builder) for 2014/15. He will remain eligible for consideration for payment of an annual bonus and Deferred Share Award for 2013/14, subject to performance over this period and determined in the normal manner after the year end.
Under the terms of his contract, King could be entitled to a cash severance payment of up to 175% of his base salary (worth potentially up to £1.7m) at departure. However, he has offered to waive the cash entitlement and the Remuneration Committee has therefore determined that:
• There will be no payment in lieu of notice
• There will be no acceleration of vesting for any share awards
• The 2012/13 and 2013/14 Deferred Share Awards will subsist in full and will be released at the end of the deferral period.
• The performance period for the 2011 LTIP award is due to end in March 2014, prior to Justin’s departure. This will vest in tranches during 2014 and 2015, subject to normal performance conditions
• LTIP awards made to him in 2012 and 2013 will subsist in full and will vest at the normal date subject to normal performance conditions
Sainsbury’s said this arrangement will ensure that any payment to King is aligned with the performance of the company following his departure; a sign of his confidence in the new management and the business’s continuing prospects.
Mike Coupe will receive a salary of £900k as chief executive. The overall variable incentive opportunity for the chief executive role will remain unchanged. However, it will be rebalanced towards the long-term award (Future Builder LTIP award). The incentive opportunity will be limited to 110% of salary for each of the annual bonus and Deferred Share Award with vesting subject to achievement of performance targets. Coupe will be granted a core LTIP award under the Future Builder of 62.5% of salary with potential vesting of 0-4x (ie up to 250% of salary for achievement of stretch objectives) subject to three-year performance targets. The changes in incentive opportunity will only come into effect from the date of promotion and so will be pro-rated accordingly in 2014/15. He will receive a pension allowance of 30% of salary. Coupe’s contractual terms have been aligned with current best practice.
Further details of the operation of the Deferred Share Award and LTIP are set out in the Directors’ Remuneration Report in Sainsbury’s Annual Report and Accounts 2012/13. The group said full disclosure of these remuneration arrangements will be provided in its Directors’ Remuneration Report in the group’s Annual Report and Accounts 2013/14.