The UK's second largest supermarket group, J. Sainsbury, is replacing its chief executive as it attempts to halt its decline.

Sir Peter Davis, currently chief executive of life insurance and pension company Prudential, is to replace Dino Adriano.

During his time at the helm of the Pru, Sir Peter was instrumental in the creation and successful launch of UK internet-based bank, Egg.

Sainsbury's said it was necessary to appoint a new chief executive to make radical changes because of the increasing pressure and pace of change in retailing.

The surprise announcement came as the group revealed a modest 2% rise in sales in the two months up to Christmas and the new year.

Homebase sales strong

But despite this, it warned that profits this year would be lower than expected.

Sainsbury's now expects pre-tax profits before one off items to come in between £560m and £610m.

Sales at its supermarkets division grew 4% in the 12 weeks to 8 January, or 2% if extra selling space added since 1998 is not included.

Sales at its home improvements division Homebase grew 17.3%, with like-for-like sales up 13.6%.

Margins under pressure

Sainsbury admitted that industry margins were under pressure, but said its own gross margins had been stable in the last quarter.

"The core message is that gross margins have held pretty steady but other costs have gone up and one of the things we have to do in the next few months is look at the overall level of the cost base," Mr Davis said.

Sainsbury's said its current chief executive, Dino Adriano, would resign on 29 February, although he would remain as a director of the company until his retirement on 31 May.

He has been chief executive for the past two years, during which time the supermarket has lost ground to competitiors Tesco and Asda.

Prudential said that Jonathan Bloomer would become group chief executive on 1 March, two months earlier than he had been due to replace Sir Peter.