Supermarkets giant Sainsbury's (SBRY) slips 1.8% to 327.3p after warning challenging times lie ahead for embattled food retailers. Yet the £6.4 billion cap's full-year figures contain many positives, among them better-than-expected profit.

You can drill down into the finer details of the preliminary results, swan song figures for long-serving CEO Justin King (pictured above) here. Highlights include Sainsbury's underlying pre-tax profit, up 5.3% to £798 million in the year to 15 March, ahead of analysts' forecasts and giving the FTSE 100 constituent confidence to hike the full-year dividend 3.6% to 17.3p.

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Like-for-like sales, stripping out trading at new stores and excluding petrol, crept up just 0.2%. This is positive in the context of March's fourth quarter update, which revealed Sainsbury's first quarterly fall in like-for-like sales for nine years amid increasingly testing conditions.

In his outgoing statement, King warns that 'while the general economic outlook is showing some signs of improvement, conditions in the food retail sector are likely to remain challenging for the foreseeable future a customers continue to spend cautiously'.

The grocery market has slowed and the 'big four' - Tesco (TSCO), Morrisons (MRW), Wal-Mart-owned ASDA and Sainsbury's - have faced fierce competition from German hard discounters Aldi and Lidl, as well as the pound shops. They've responded by cutting prices on everyday food items in an attempt to stop the exodus to low-cost chains, notably embattled Morrisons, slashing the prices of 1,200 everyday items in an attempt to stem its shopper exodus.

Encouragingly, Sainsbury's has maintained its grocery market share at 16.8%, its highest level for a decade, according to well-followed research firm Kantar, no mean feat in the current brutal environment in which grocery groups operate. Helping the retailer hold its own is its strong multi-channel presence. Sainsbury's 600-plus convenience stores outnumber its supermarkets estate and speak for a third of Britain's convenience market growth, while its groceries online business has reached the magical £1 billion annual sales milestone.

Additional strengths are its own-brand ranges by Sainsbury's and Taste the Difference, the provenance of its food sourcing, Brand Match and Nectar, as well as the speedy growth of Sainsbury's general merchandise and clothing ranges.

Back in January, King announced he would leave in July after a decade in charge, during which time Sainsbury's annual sales have burgeoned by £10.3 billion to £26.4 billion and taxable profits trebled. The charismatic former Marks & Spencer (MKS) and ASDA man, widely credited with the positive transformation of the grocer's fortunes, will be succeeded by commercial director Mike Coupe.

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Issue Date: 07 May 2014