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Sainsbury’s warns of £500m hit to profits due to pandemic

Published on: 1st May 2020

Despite an increase in grocery sales, other areas of the business have underperformed due to social distancing measures.

Sainsbury’s has said that the impact of Covid-19 is expected to leave underlying profits broadly flat for the year to March 2021, as the company faces increased costs to put in place and maintain measures to protect staff and customers, as well as experiencing falls in non-food and fuel sales. This comes in spite of surging demand for food and drink, as well as an injection of around £450m in business rates relief.

Full-year results showed a 2% fall in underlying pre-tax profits to £586m for the year to March 7th. On a statutory basis, pre-tax profits rose to £255m from £202m the previous year.

The company, which also owns the Argos chain, deferred decisions on its dividend payout until later in the financial year.

Presenting his last set of results before he leaves the company on May 31st, 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 at mid-September, and that shoppers could see expect to 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.

Grocery supply levels were reported to be beginning to return to normal after the stockpiling rush, but the company admitted there was pressure on some items from overseas. However, clothing and general merchandise sales, excluding at Argos, have suffered, tumbling 53% and 22% respectively in the seven weeks to April 25th.

Mike 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.”

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