Sainsbury's CEO Justin King to step down in July

LONDON, England - Justin King will step down as chief executive of British grocer J Sainsbury in July after a decade at the helm, with the firm opting for continuity by choosing commercial director Mike Coupe as his successor.

The company said King, who has almost trebled underlying profit during his tenure, will depart after its annual shareholder meeting on July 9.

Coupe, 53, had been favourite to succeed the highly regarded King to lead a company battling with Wal-Mart Stores' Asda to be Britain's No. 2 player behind market leader Tesco .

Shares in Sainsbury were down 2.7 percent at 346.9 pence at 0950 GMT and briefly touched an 11-month low.

While no surprise, King's departure raises the question of how his successor will defend profits in the face of stagnating household incomes and a two-pronged challenge from discount supermarkets and luxury food retailers.

Coupe, a former director of Big Food Group and Iceland, has been at Sainsbury's since 2004.

There has been speculation that King could depart for over a year, with media reports linking him with a role in Formula One motor racing.

"King's decision isn't a complete bolt from the blue. It has been rumoured a bit in the last couple of years," one top 40 shareholder in Sainsbury's told Reuters on condition of anonymity.

"His successor has big shoes to fill and I suppose the million dollar question is what Justin decides to do next."

The shareholder said King would inevitably be associated with other major retailers undergoing turnarounds such as Marks & Spencer and Wm Morrison Supermarkets.

Financial analysts were similarly unsurprised.

"People felt that the tenth anniversary would probably mark the time when Justin moved off despite all the denials," said independent retail analyst Nick Bubb.

"Mike's served under Justin for a long time, hasn't got the charisma of Justin ... but I think they see him as a solid choice in a pretty challenging time for the industry."

Shore Capital analyst Clive Black said Coupe replacing King was "totally predictable".

SQUEEZED MIDDLE

The big four supermarkets, which include Tesco, Asda and Morrisons as well as Sainsbury's, are being squeezed between hard discounters Aldi and Lidl and upmarket players Waitrose and Marks and Spencer.

Sainsbury's has resisted the pressure better than its rivals, eking out its 36th straight quarter of like-for-like sales growth in the third quarter. But analysts reckon all the big four lost market share and saw sales volumes decline in the run-up to Christmas.

Earlier this month, Sainsbury's reported its "best Christmas ever" but warned that consumers were likely to tighten their belts in the early part of 2014 and cut its sales growth forecast accordingly.

"Frankly, supermarket retailing is getting a bit tougher and it's understandable he (King) wants to go out on a high note," added Bubb.