Sainsbury has issued a profits warning as well as replacing Sir Peter Davis as chairman of the company.

It has announced today that its pre-tax profits for 2004/2005 will be significantly below consensus market forecasts.

The majority of the impact is expected in the first half of the year and the company has attributed this to a number of causes, including aggressively trading out of its over stocked position in non-food goods.

Other factors include the deferral of a planned depot closure and operating with higher than average wastage levels.

This announcement follows the news that the current chairman, Sir Peter Davis, is set to step down today following a row over his bonus.

The company has appointed ex group finance director of Lloyds TSB Group, Philip Hampton, who will take up his new role on July 19 and will be paid £395,000pa.

Davis quit a year ahead of schedule after shareholders threatened a revolt against a share bonus he was awarded worth £2.4m for 2003, a year in which Sainsbury had experienced falling sales and profits.

Davis is the fourth senior executive to leave in as many months. His departure follows that of Stuart Mitchell, head of supermarkets, Sara Weller, the deputy managing director and Keith Evans, the head of non-food.

Lord Levene, the senior independent director and chairman of the nomination committee, said “We will now have the powerful combination of Philip Hampton with strong financial and strategic experience as chairman and Justin King, chief executive with proven retailing skills.”

The Board of Sainsbury has said that it would like to express its gratitude to Davis, “for all his hard work on behalf of the company”.

It is still unclear whether Davis will retain his shares or receive compensation.