Sainsbury's new chief executive will have to rebuild sales

Underlying profits for the year fell to £675m ($1.2bn) from £695m in 2003 as sales remained disappointing.

The company's new chief Justin King said the chain had "not stayed as sharp on pricing as we should have done".

Sainsbury's lost its position as market leader to Tesco in 1995, and was pushed into third spot by Asda last year.

Lower prices

Mr King said the company needed to "re-focus" its efforts on customer needs.

"We are clear about the qualities and strength of the Sainsbury's brand," he said.

This has been a year of tremendous change Sir Peter Davis, Sainsbury's chairman See Sainsbury's latest share price

"Our job is to provide even better quality products at good value prices.

"We made our first moves on pricing earlier this month and customers are already seeing the benefit in their shopping baskets."

Mr King took over the chief executive role from Sir Peter Davis in March this year, with Sir Peter taking over the chairman's role.

In announcing the results, Sainsbury also unveiled further management changes.

The managing director of its main supermarket business, Stuart Mitchell, is to step down so Mr King can have more control over day-to-day operations.

Change

Under the leadership of Sir Peter, Sainsbury's has undergone a three-year programme of store modernisation.

However, sales have remained disappointing. Total sales at Sainsbury's supermarkets were up 2.2% at £15.3bn, but like-for-like sales - which strip out the effects of new store openings - were down by 0.2%.

"This has been a year of tremendous change," Sir Peter said.

Sainsbury's sold Shaw's, its US supermarket business, to focus on UK interests, and has bought Bells Stores, a chain of 54 neighbourhood convenience stores.

"The scale of change and the associated disruption in Sainsbury's supermarkets and the weakening of the dollar have impacted our results for the year," Sir Peter added.