By William Smale BBC News Online business reporter

(Sainsbury's has a) lack of ability to retail clothing Jeff Banks

The acrimonious departure of fashion designer Jeff Banks has once again called into question the success - or otherwise - of the ongoing recovery at J Sainsbury.

After the group - today the UK's third largest supermarket chain - revealed at the weekend that it had dropped the designer, Mr Banks hit back by attacking the company's efforts to move into non-food items.

He accused them of having a "lack of ability to retail clothing".

Mr Banks also wants a £10m pay out.

Termination

Sainsbury's is continuing to insist the termination of the contract - which was due to run until June 2005 - had actually been amicable, but Mr Banks appears to somewhat disagree.

In his statement he went on to criticise pretty much all parts of the company's operations, from warehouse management, to staff training, advertising and even IT.

Sir Peter Davies is continuing with a three-year turnaround plan

The spate with Mr Banks, who became a household name in the UK after he presented the BBC's Clothes Show programme in the 1980s, is the latest high blow to the Sainsbury's ongoing efforts to regain lost ground on market leaders Tesco and Asda.

It follows a month after the company reported a fall in turnover during the summer - its like-for-like sales in the three months to October 11 were down 0.2%.

Misleading

Tesco and Asda both announced sharp increases in sales for the period, as shoppers rushed to buy food and drinks with which to make the most of the hot weather.

Where now for Sainsbury's, which was also fined £14,400 last month for misleading customers about a series of special offers on household items, and faced speculation of a possible bid from US buyout specialist Kohlberg Kravis Roberts?

I do not personally believe that this is a bad thing for Sainsbury's Simon Proctor, analyst

Head down and continue rolling out new non-food lines, is the opinion of most analysts.

A spokeswoman for Sainsbury's said it was disappointed that Mr Banks had chosen to make such comments.

She said the company had chosen to part company with the designer after reviewing its clothing ranges, and recognising the need to bring in new - and more exclusive - lines.

New offering

"Jeff Banks is a very successful designer who also designs for Debenhams, Matalan and Argos, and our customers who are very knowledgeable about what is available, know that," she argued.

"They have told us that, in addition to the convenience of buying clothing while doing their weekly food shop, they want differentiated clothing. We are working on that new offering."

She said the new ranges would arrive on the hangers in autumn 2004.

The spokeswoman also denied there was any personal animosity between Mr Banks and Sainsbury's chief executive Sir Peter Davis, despite speculation to the contrary in a number of newspapers.

Non-food range

Sir Peter has laid great emphasis on improving Sainsbury's non-food range, as part of his three-year strategy to turn the group around.

While Mr Bank's departure has certainly brought all the wrong headlines, some analysts believe it is actually a positive sign, with the company wishing to take greater control of its clothing lines, and bringing the design 'in-house'.

Simon Proctor, of brokerage Charles Stanley, said: "I do not personally believe that this is a bad thing for Sainsbury's. The company has simply decided to put a renewed emphasis on its clothing lines.

"While Sainsbury's does still trail behind Tesco and Asda when it comes to non-food items, it is working hard to significantly improve matters. These things just take time."

Spring/summer

Mr Banks, 60, was appointed by Sainsbury's in 2000, and his clothing, branded Jeff & Co is on sale in 74 of its stores.

Recently in the news for attacking the abilities of fellow designer Stella McCartney, he has already designed Sainsbury's spring/summer 2004 range.