// Tesco says the “significant extra costs” from coronavirus crisis could fall between £650m-£925m
// However, this would be largely offset by business rates holiday and food volume increases
// Tesco also posted uplifts in full-year overall profits and UK sales
Tesco has warned that the panic buying in recent weeks may have led to a 30 per cent sales boost but the impact of coronavirus could the retailer cost as much as £925 million.
The supermarket giant, which admitted that the panic-buying craze induced by fears over the coronavirus pandemic led to a clearing of its supply chain of certain items, said supply has now stabilised and “more normal sales volumes are being experienced”.
The Big 4 grocer added that the company has recruited 45,000 more staff members in a bid to cope with unprecedented soaring demand during the coronavirus pandemic.
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Chief executive Dave Lewis, who is planning to step down this autumn, said the “significant extra costs in feeding the nation” through the coronavirus crisis could fall between £650 million and £925 million.
The costs pertain to offering staff a coronavirus bonus, recruiting more than 45,000 workers, distribution and general store expenses.
However, the first few weeks of the coronavirus crisis saw sales skyrocket 30 per cent due to the wave of panic buying and stockpiling, and Tesco said that if customer behaviour returns to normal by August, it expected the additional costs would be “partly offset” by the government’s offer of a one-year business rates holiday.
The rates holiday is calculated to save around £585 million for Tesco, but the Big 4 giant added that its coronavirus costs would also be “largely offset” by the benefits of food volume increases and its own “prudent operations management”.
“Covid-19 has shown how critical the food supply chain is to the UK and I’m very proud of the way Tesco, as indeed the whole UK food industry, has stepped forward,” Lewis said.
“In this time of crisis we have focused on four things; food for all, safety for everyone, supporting our colleagues and supporting our communities.
“Initial panic buying has subsided and service levels are returning to normal.
“There are significant extra costs in feeding the nation at the moment but these are partially offset by the UK business rates relief.”
The news comes as Tesco posted uplifts in full-year overall profits and UK sales and confirmed it would pay a final dividend of 6.5p for last year, and plans to pay £5 billion more to shareholders once it completes the £8.2 billion sale of its last Asian businesses in the second half.
For the year ending February 29 – which was before the coronavirus crisis escalated globally – Tesco reported sales of £56.5 billion across the whole company, down 0.7 per cent year-on-year.
In its UK market, full year sales grew a marginal 0.1 per cent year-on-year to £44.9 billion.
Meanwhile, Tesco’s overall underlying operating profits jumped 13.5 per cent year-on-year to £3 billion but statutory profit before tax fell 18.7 per cent to £1.3 billion.
Net debt stood at £12.1 billion.
Tesco said while most of the Asian disposal proceed will be paid to shareholders, £2.5 billion of sale would be used to eliminate a pension funding deficit.