Sainsbury’s warns of £500m coronavirus hit
Sainsbury’s has warned over a coronavirus hit to profits of more than £500 million despite surging grocery sales, and said social distancing in stores is likely to remain throughout 2020.
The supermarket giant said the impact of Covid-19 is expected to leave underlying profits broadly flat for the year to March 2021 as it faces soaring costs for measures to protect staff and customers, as well as falls in non-food and fuel sales.
This comes in spite of surging demand for food and drink, as well as around £450 million in business rates relief.
Sainsbury’s, which also owns the Argos chain, deferred decisions on its dividend payout until later in the financial year – a move that comes after rival Tesco faced criticism for paying out £635 million having received a similar amount in business rates relief.
Presenting his last set of results before he bows out on May 31, chief executive Mike Coupe said that while the group expects the lockdown to start being lifted by the end of June, he sees business disruption lasting until mid-September.
He cautioned that shoppers could see social distancing measures in place throughout 2020.
The group added that the profits impact could be greater if lockdown is extended further and if there is a longer-term hit to the wider economy than expected.
Its full-year results showed a 2% fall in underlying pre-tax profits to £586 million for the year to March 7.
On a statutory basis, pre-tax profits rose to £255 million from £202 million the previous year.
Shares fell 3% after the results.
Mr Coupe said the past few weeks had been an “extraordinary time for our business”.
He added: “This is an unsettling time for everyone, but I am incredibly proud of the way the business has responded, continually adapting and responding to customer feedback.
“We will continue to work hard to provide food and other essential products to households across the UK and Ireland who are adapting to a new way of living.”
The group saw total grocery sales jump 12% in the seven weeks to April 25, compared with a 2% rise in the final quarter of its previous financial year.
Total grocery sales jumped as much as 48% higher in the week to March 21 amid panic-buying ahead of the lockdown.
Mr Coupe said supply levels were beginning to return to normal after the stockpiling rush, but he admitted there was pressure on some items from overseas.
But while grocery sales have spiked, total clothing and general merchandise sales, excluding at Argos, have suffered, tumbling 53% and 22% respectively in the seven weeks to April 25.
Its Sainsbury’s Bank financial services arm has also been knocked, but the chain said it would not require capital injections from the group.