Fund managers back Sainsbury's to win supermarket battle

A top 10 investor in Tesco told The Telegraph that Philip Clarke, chief executive, should be “dramatic” in response to Morrisons move with his own deep price cuts.

Sainsbury’s was named as the company that should perform strongest despite the fact that this week the retailer will report its first decline in sales for almost a decade.

The City is forecasting that Sainsbury’s will report a 3pc fall in like-for-like sales for the last three months, ending the company’s run of 36 consecutive quarters of like-for-like sales growth.

However, despite the expected fall in sales, investors believe Sainsbury’s is fundamentally stronger than its rival grocery retailers.

In a survey of fund managers compiled by Capital Spreads, 27pc said Sainsbury’s will be the best performing FTSE 100 retailer in 2014, while 29pc said that Mr King is the most effective chief executive, despite the fact he will step down this summer.

Nick Lewis, head of trading and market risk at Capital Spreads, said: “With its long history of quarterly growth and an enviable increase in market share since King’s accession to the role of CEO, it would appear that City fund managers deem the business to be in a very good shape upon his departure.”

Sainsbury’s was placed in the survey above Tesco and Morrisons, but also Sports Direct, Next, Marks & Spencer and Kingfisher.

The boss of Next, Lord Wolfson, was named the second most effective chief executive, ahead of Mr Clarke.

However, Chris White, head of equities at Premier Asset Management, warned that Sainsbury’s future profitability “may be largely out of its control” if a full-scale price war erupts in the grocery industry.

He added: “Tesco, the market leader, recently abandoned its margin target and committed £200m to reducing prices. With the lowest margins in the sector, Sainsbury’s would be hit particularly hard if forced to follow.

“The best CEOs have a knack of getting out at the right time. Tesco’s Sir Terry Leahy and Manchester United’s Sir Alex Ferguson are both perfect examples. Justin King might just be another.”

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