The City bears are starting to sniff around Sainsbury’s ahead of its full-year figures next Wednesday.

In its Q4 trading update in March, Sainsbury’s confirmed full-year sales growth of 5.5 per cent and that it was “comfortable” with consensus pre-tax profits of£485 million.
Furthermore, there is no doubt that, in terms of growing sales, chief executive Justin King has delivered the goods with his Making Sainsbury’s Great Again programme, which launched in October 2004.

He vowed to deliver additional sales of£2.5 billion for the three-year period to March 31 and beat this target with an increase of£2.7 billion.

However, some City analysts expect Sainsbury’s to take more of a hit from consumers tightening their purse strings than rivals, such as Tesco and Asda. Their views are backed up by the latest TNS Worldpanel figures, which showed that Sainsbury’s till roll sales of 4.2 per cent are trailing those of its rivals for the 12 weeks to April 20. Morrisons delivered sales of 9.2 per cent, Asda 6.8 per cent and Tesco 4.5 per cent.

In a research note issued yesterday, JP Morgan analysts said: “In terms of outlook, we feel that Sainsbury’s trading slowdown relative to the market should be a cause for concern. Were this relative performance to continue in more deflationary times, we would expect downside to earnings estimates.”

JP Morgan is not alone in expressing caution. Panmure Gordon expects good numbers next week and said that Justin King has done an impressive job. But Panmure Gordon analyst Philip Dorgan said: “Profits are still lower than those achieved in 1991, operating cash flow growth has been weak and we believe that the industry environment is about to get a lot tougher.”

Despite these gloomy views, King has often surprised the industry watchers by unveiling buoyant results. Furthermore, Sainsbury's bigger stores that sell a high proportion of non-food are registering strong sales growth, which is a good omen for its general merchandise expansion programme.

However, Sainsbury’s, which is located further along the premium food spectrum than Tesco, Asda and Morrisons, could find the buoyant sales growth of the past few years harder to come by – particularly with 13 quarters of consecutive sales growth under its belt. After four years at the helm, it is time for King to show his true mettle.

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