Sainsbury’s underlying profits fell by 39% to £356m from £586m
Sainsbury’s (LON:SBRY) recorded an annual loss as the cost of serving customers during the pandemic, along with its transformation of its Argos business weighed down on its balance sheet.
The FTSE 100 supermarket chain confirmed on Wednesday that is made a loss before tax of £261m for the year ending March 6, a swing from a £255m pre-tax profit the year before. The results followed £321m worth of write downs which were in the most part connected to its decision to shut 420 Argos high street shops.
The group’s underlying profits fell by 39% to £356m from £586m after Covid-19 related costs, sick pay, PPE etc, amounted to £485m.
Sainsbury’s announced in December that it would repay £440m of business rates relief it received during the pandemic. It followed similar moves by Tesco, Asda, Morrisons and Aldi and means the grocers collectively returned more than £1.7bn.
The supermarket has also benefited from the huge demand for food deliveries during the pandemic, resulting in online sales jumping by 120% as it has doubled its capacity to more than 850,000 online orders a week.
The supermarket is expecting its underlying profits will double this year to £620m, above the £586m from before the pandemic. This is based on the grocer’s expectation that its heavy costs will fall off, while its banking arm will see a rise in profitability, which should outweigh falling sales as customer behaviour returns to normal.
“This year’s financial results have been heavily influenced by the pandemic. Food and Argos sales are significantly higher, but the cost of keeping colleagues and customers safe during the pandemic has been high”, Simon Roberts, Sainsbury’s chief executive, said.
“Sainsbury’s was the biggest faller on the FTSE after taking a big hit from Covid-related costs. Supermarkets have done a stellar job of keeping their shelves stocked during the pandemic and expanding online capacity, but this hard work is not translating into a sharp rise in profit as some people might have expected.