Coronavirus: Sainsbury’s warns of £500m hit as profits dip

Sainsbury's covid-19 trading update
Sainsbury's said the impact of Covid-19 is expected to leave underlying pre-tax profits broadly flat for the year to March 2021
// Sainsbury’s underlying pre-tax profits drop 2% to £586m
// Total grocery sales jumped 12% in the seven weeks to April 25

Sainsbury’s has reported a decline in underlying full-year profits as it warns of a coronavirus hit of more than £500 million to the current year’s profits.

The Big 4 grocer saw a two per cent 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.


Total grocery sales jumped 12 per cent in the seven weeks to April 25, compared with a two per cent rise in the final quarter of its previous financial year.

In the week to March 21, during the peak of panic-buying ahead of the lockdown, grocery sales jumped as much as 48 per cent higher.

While grocery sales have spiked, total clothing and general merchandise sales – excluding Argos – have suffered, tumbling 53 per cent and 22 per cent respectively in period ending April 25.

The grocer warned of a £500 million hit due to the pandemic as it said social distancing measures together with falls in clothing and fuel sales would offset surging grocery trade.

Sainsbury’s also said the impact of Covid-19 is expected to leave underlying pre-tax profits broadly flat for the year to March 2021, despite £450 million in business rates relief and surging demand for food and drink.

The retailer also faces soaring costs for measures to protect staff and customers, as well as falls in non-food and fuel sales.

Sainsbury’s, which also owns the Argos and Habitat chains, 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.

Shares fell three per cent after the results.

Coupe said the past few weeks had been an “extraordinary time for our business”.

“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,” he said.

“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.”

Coupe also said supply levels were beginning to return to normal after the stockpiling rush, but he admitted there was pressure on some items from overseas.

with PA Wires

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