Tesco sees profits fall by 20% due to pandemic

Tesco hires Thierry Garnier as non-executive director

Tesco (LON:TSCO) felt the impact of the pandemic as 20% was wiped off the supermarket’s full-year profits even though it achieved “exceptionally strong” sales growth.

The FTSE 100 company confirmed it made a profit before tax of £825m for the year to 27 February, 19.7% low than the year before, despite its sales in the UK growing by 7.7% to £39.4bn.

A major factor was the extra costs due to Covid-19, which included £892m worth of bonuses for staff, as well as the company returning £535m of business rates relief to the government.

The supermarket chain said it had taken customers from a number of its competitors as its sales grew significantly at the beginning of the first national lockdown and more recently when consumers were stockpiling goods.

Tesco said it was expecting the gains it made in extra sales to lessen as lockdown restrictions ease.

Ken Murphy, chief executive of Tesco, commented on the company’s results, as well as the decision to maintain its dividend:

“While the pandemic is not yet over, we’re well-placed to build on the momentum in our business. We have strengthened our brand, increased customer satisfaction and improved value perception. We have doubled the size of our online business and through Clubcard, we’re building a digital customer platform. Sustainability is now an integral part of our business strategy and we’re doubling down on our efforts to reach net zero,” Murphy said.

“Our decision to protect and hold the dividend flat for this financial year demonstrates our commitment to shareholders. We believe we can create significant further value for them and every stakeholder in our business by continuing to focus on value, loyalty and convenience for customers, underpinned by strong capital discipline.”

Tesco also announced that it has named Thierry Garnier, the chief executive of B&Q’s parent company, as a non-executive director.