Sainsbury’s has reported underlying pre-tax profit up 5.3% to £798m in the year to March 15 in boss Justin King’s last full-year update before he departs in July. Retail Week takes a look at the analyst reaction.

“Justin King’s final set of annual results are the end of an era in the UK grocery market. The outgoing chief executive is leaving Sainsbury’s in relatively fine fettle after overseeing an impressive recovery and reinvention. Operationally, the business is in good shape, with a decent exposure to the c-store and online sweet spots as well as a robust performance from the main estate, helped by strong product, execution, availability and Brand Match. However, like-for-likes are running out of steam, and profitability might well have peaked for the medium term at least. The domino effect of the near £1 billion price action announced by Tesco, Morrisons and Asda for this year alone leave Sainsbury’s already frail margins looking vulnerable. While there are no silver bullets, moderating capex devoted to large stores and joining Waitrose in a race to the top could help Mike Coupe get off to a good start.” Bryan Roberts, Kantar Retail EMEA

“In departing chief executive Justin King’s last results, we saw consensus beating results. Operating margin expanded in 2013 by nine basis points, this provides a very positive comparison with the other UK retailers, which saw declines in the tough competitive market (Tesco UK – 18 basis points, Morrisons – 45 basis points). Guidance is that like-for-like in 2014 will be similar to 2013 (+0.2%), that is positive like-for-like - far better than any expectations for Tesco and Sainsbury’s. There was none of the discussion of the ‘price war’ we have seen from Morrisons and Tesco. Sainsbury’s represents the quality end of the sector and therefore do not need to react as strongly to the discounters’ growth. Sainsbury’s offers this ‘quality food for the masses’ very successfully and the actions of Morrisons and Tesco moves them further away from the quality sector, further strengthening Sainsbury’s differentiation.” Bruno Monteyne, Bernstein

“Sainsbury has delivered full year 13/14 profit before tax around 2% ahead of expectations. This is very welcome – but the focus is understandably on the outlook for the year ahead. The company typically provides very detailed guidance and has only slightly weakened the breadth of its forecasts despite the current volatile UK food retail market. Like-for-like sales are expected to be similar to the prior year. It seems that the company is broadly forecasting a retail margin of  circa 3.35-3.40% - a clear decline from the 3.65% registered in 13/14 but not so different from our forecast of 3.47% and far less dramatic than some may have feared. No doubt there will be questions about the deliverability of the guidance, but given the degree of negativity on this stock we would expect a clear bounce in the shares.” James Anstead, Barclays European Retail Equity

“There will be a lot of focus on whether Justin King still thinks the price war started by Morrison’s is just part of the normal cut and thrust of the industry, but he is determined to go out on a high note and there is no sign of any great caution about the outlook in the statement, with lots of emphasis on how well “differentiated” the business is.” Nick Bubb, independent analyst

“Following its first fall in like-for-likes in nine years in quarter four, this sales performance is far from unexpected. However, amid intensifying competitive pressures in UK grocery, profit growth ahead of expectations is pleasing. Sainsbury’s continues to steer away from significant price cutting, against the backdrop of a discounting war among its Big Four rivals in response to continued incursions made by the discounters. The grocer is instead opting to stick to its knitting of helping customers Live Well for Less through an offer of ‘high quality, affordable own-brands’. While we believe progress in this area can provide Sainsbury’s with a more sustainable competitive advantage over time, it will undoubtedly face a more difficult trading period amid a stronger focus on price among its peers.” George Scott, Conlumino

“Sainsbury’s new chief execuive, Mike Coupe, needs to set out Sainsbury’s response to the recent price investments and justify their stance on value simplicity pricing. The focus remains on Sainsbury’s trading margins and cashflow and capex/new space ambitions which may change going forward. In the current environment, we expect to be reducing our margin assumptions for FY15+, albeit Sainsbury’s EBITDA margin was ahead of our expectations this year. The current 5.2% yield helps support the shares albeit investors need reassurance on future UK trading strategy and any updates on non-food, convenience, online and international.” Mike Dennis, Cantor Fitzgerald

“Sainsbury reported full year results which were operationally better than expected, but there remains a fairly stretched balance sheet for the company in our view. The company’s outlook is fairly vague with full year like-for-like sales growth similar to 2013/14, net debt to be similar and cost inflation to be at the lower end of the 2-3% range. Sainsbury commented that conditions in food are likely to remain challenging. With the recent price investments by Morrisons, we think this will dominate the debate on Sainsbury shares in the near term.” Ric Thakrar, Citigate