Tesco full-year profits rise as it incurs ‘significant’ coronavirus costs

Tesco has recruited more than 45,000 new colleagues since March 20 to cope with the increased pressure on its operations and sick leave taken by staff as a result of coronavirus, which triggered a 30% jump in panic buying in the first few weeks of the crisis.

Although the retailer has said that buying levels have now normalized, it estimates that due to “significant cost increases in payroll, distribution and store expenses” it will incur additional costs of between £650m and £925m in its current financial year.

However, the grocer has said that provided customer behaviour normalizes by August “it is likely that the additional cost headwinds incurred in our retail operations would be largely offset by the benefits of food volume increases, twelve months’ business rates relief in the UK and prudent operations management.”

Tesco has said that there “is simply not enough capacity to supply the whole market” through its ecommerce offer, despite having increased its capacity more than 20% since the coronavirus crisis hit the UK in earnest last month, comprising 145,000 additional delivery slots.

The grocer said that “between 85% and 90% of all food bought will require a visit to a store”.

Separately, Tesco reported a 13.5% uplift in group operating profit before exceptional items to £2.9bn its preliminary results for the 52 weeks to February 29 2020.

UK and Republic of Ireland sales rose 0.1% during the period, up 0.2% on a constant currency basis, to £44.9bn.

Group sales declined 0.7% in the year to £56.5bn, down 1% in constant currency terms.

Chief executive Dave Lewis said: “Over the last five years we have focused on serving customers better, re-engaging our colleagues, completely resetting our relationships with our suppliers and as a result we have been able to add value for our shareholders.

“These endeavours put us in a strong operational and financial position to deal with the challenges of COVID-19.

“I would like to thank Tesco colleagues for their contribution to this turnaround journey and for their unbelievable commitment as we face into the COVID-19 crisis. Their contribution continues to be immense.”