THE supermarket giant J Sainsbury will report interim results this week, with sector watchers keen to find cracks in the Justin King recovery story.

It would be churlish to suggest King has done anything but a sterling job since he took the helm and profits are expected to meet City forecasts. But slowing sales growth and a sales to profits ratio far inferior to sector leader Tesco means the progress made so far risks running out of steam.

Fears are growing that Sainsbury could be hit by a return to form by Tesco this Christmas. And in the world of supermarkets that spells trouble for its rivals — not just for December but for January and February because shoppers tend to reward supermarkets that offered them a good deal at Christmas as they go into the new year.

A sneak preview of Tesco’s Christmas range at its Beckton store in east London last week showed it is going big and early this year. No doubt Sir Terry Leahy, its chief executive, is hoping shoppers will spend double reward points from its Clubcard loyalty scheme in-store as soon as their Clubcard mailing arrives in the post this month.

Sainsbury is fighting back with discount coupons at the till. The group has worked hard to counteract the view that its products are more expensive than rivals’ — helped by the huge success of its own-brand basics range.

However, despite King’s best efforts, Sainsbury still appears to lack the penetration of Tesco or Asda. Research from MF Global shows that fewer Sainsbury shoppers who regularly buy baby, household and beauty products buy them from Sainsbury stores. This contrasts with shoppers at Tesco and Asda, who tend to buy more of these products from their own supermarket.

MF Global also said data from TNS in April showed that Sainsbury had fewer family shoppers than Tesco and Asda. This is bad news because families buy lots and often — typically trading up to big pack sizes and buying multiple meals. Until Sainsbury can really prove it is a great destination for a one-stop shop, it will be vulnerable.

Luckily for Sainsbury, even if it does falter this Christmas that will only serve to renew bid speculation. The Qatar Investment Authority still controls almost a third of the company and, although a renewed takeover offer in current market conditions looks far-fetched now, that won’t stop the gossips.

The shares closed on Friday at 330½p — at this price they are still worth tucking away as a long-term hold.

Inmarsat INVESTORS should zone in on shares in Inmarsat — since the start of the year they have soared 25%. The global satellite communications company has become a proxy for the relentless march of technology into our lives — a trend that shows little sign of abating.

Inmarsat started life 30 years ago as a UN charter organisation funded by 88 countries to develop a global maritime distress signal. Since 2005 it has been a thriving commercial business listed on the London Stock Exchange.

Its technology makes it possible to call from your mobile on an aircraft and beam breaking news via videophone from sporting events or war zones. The group’s American boss, Andy Sukawaty, has recently agreed to stay on as chairman and chief executive until 2011, which is good news for shareholders.

Under the stewardship of the theatre-loving techie, the group has delivered strong results despite the tumultuous time in the shipping industry, which makes up a big slice of its profits.

The future looks bright too. The company recently won the rights to the so-called S-band licence from Europe, which could pave the way for wi-fi links across the European Union as well as new pan-European digital audio and television services.

Unfortunately the shares, which closed on Friday at 592½p, already have an other-worldly rating — trading at 24 times earnings — treble the sector average. But this is a growth business backed by some of the world’s smartest investors including Blackrock and Lansdowne, the asset managers.

Expect positive newsflow when it provides its latest trading update tomorrow. Buy.

jenny.davey@sunday-times.co.uk

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