Sainsbury's has reported a 39% drop in underlying profit for its 2020/21 full-year, with the retailer saying that strong food sales were outweighed by extra costs and a decision to forgo business rates relief.
“This year’s financial results have been heavily influenced by the pandemic," chief executive Simon Roberts said. "Food and Argos sales are significantly higher, but the cost of keeping colleagues and customers safe during the pandemic has been high."
Sainsbury's, the UK's second largest grocer after Tesco, reported an underlying pretax profit of £356 million (€409.5 million) in the year to March 6. This is in line with guidance of 'at least' £330 million, but down from the £586 million it made in 2019-20.
Grocery sales rose 7.8% and general merchandise sales increased 8.3%, however the company said it incurred an extra £485 million in costs due to the COVID-19 crisis.
In addition, the group declined business rates relief offered by the government, which was worth about £410 million.
Sainsbury's said it still expected underlying pretax profit in the 2021-22 year to rise and is comfortable with analysts' consensus forecasts of around £620 million.
Announcing its results, Roberts said that the group has a "bold three-year plan" to put food back at the heart of its operations and drive improved performance. "We are transforming the way we work and I am encouraged by how all of our teams have responded and the early momentum and performance towards our plan," he added.
The group also plans to accelerate its digital transformation this year, having more than doubled its online grocery sales last year.
"[We] have done this while improving profitability," said Roberts. "Argos digital sales grew almost 70 per cent and our Argos transformation plan is on track to improve customer availability while reducing our costs."