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Britain's Lockdown Drives Tesco's Sales And Costs Higher

Published on Jun 26 2020 8:18 AM in Retail tagged: Featured Post / UK / Tesco / Dave Lewis

Britain's Lockdown Drives Tesco's Sales And Costs Higher

Tesco said underlying UK sales rose 8.7% year-on-year in its first quarter to May 30, boosted by the country being on coronavirus lockdown for the majority of that period, though costs also rose.

Prime Minister Boris Johnson announced England's lockdown on March 23, with grocery stores among the only shops allowed to remain open. That has since been eased, with all non-essential stores able to open from last week.

But a boost in sales volume for Tesco has been counteracted by the increased costs and logistical challenges of operating during the pandemic, and it reiterated a flat profit outlook.

Online Capacity

"In just five weeks, we doubled our online capacity to help support our most vulnerable customers and transformed our stores with extensive social distancing measures," chief executive Dave Lewis said.

"The costs of doing this have been significant and only partly offset by business rates relief and increased volume."

All of Britain's big four supermarket groups - Tesco, Sainsbury's, Morrisons and Asda - have seen grocery sales boosted by the lockdown.

Tesco and Sainsbury's have particularly benefited, with their networks of superstores complemented by strong online and local convenience store businesses playing well with the changing shopping habits of the crisis.

Operating Costs

Tesco, which has a 27% share of Britain's grocery market, on Friday maintained its expectation that retail operating profit in the 2020-21 year was likely to be at a similar level to 2019-20 on a continuing operations basis.

It estimated a hit of £840 million from the costs of dealing with the pandemic, offset in part by higher food sales and £585 million of business rates relief from the government.

Tesco did, however, increase its provision for bad debts at Tesco Bank and now expects it to report a loss of up to £200 million.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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