Customer Behaviour

Sainsbury’s has slumped to a £261m loss despite bumper food and Argos sales during the coronavirus pandemic. The supermarket giant said that in the year to 6 March Covid costs “to help keep our colleagues and customers safe” had been “high”.

However, it said it expected profits to bounce back in the coming year. Rival Tesco reported a sharp fall in profits earlier this month after spending nearly £900m to carry on trading during the pandemic.

Sainsbury’s said it had spent £485m on Covid-related costs, including paying colleagues that were required to shield or needed to self-isolate. It also paid back business rates relief on its stores in line with rivals.

Sainsbury’s £261m pre-tax loss for the year was despite like-for-like sales rising 8.1%.

Argos did especially well, with total sales rising almost 11% as digital sales boomed. However, Argos standalone stores, rather than those inside the supermarkets, were closed for much of the year during lockdowns.

Sainsbury’s online sales rose as coronavirus restrictions accelerated internet shopping. Online jumped from 8% of grocery sales to 17% during the year.

Chief executive Simon Roberts praised the “heroic” efforts of staff to keep the business going during the pandemic, but added: “The cost of keeping colleagues and customers safe during the pandemic has been high.”

Sainsbury’s has already embarked on a restructuring, and announced in March that 1,150 jobs were at risk.

As well as Covid costs, it also incurred restructuring costs, including the closure of 170 standalone Argos stores.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said the costs of operating through the coronavirus crisis have “seriously dented” the supermarket giant’s bottom line.

“Redesigning layouts to keep customers and staff safe, paying colleagues in full who needed to shield, all added [to costs] with £485m spent on Covid related costs,” she said.

Sainsbury’s also spent £100m on higher staff salaries and special recognition payments to colleagues “for their efforts during the crisis”, Ms Streeter added.

Keith Bowman, equity analyst at Interactive Investor, said the results offered “broad optimism” for the future.

“[But] intense competition across the sector, including from discount retailers Aldi and Lidl, cannot be ignored,” he said.

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