Tesco counted the cost of the COVID-19 pandemic as full-year profits fell by a fifth despite “exceptionally strong” sales growth.
Britain’s biggest supermarket group reported pre-tax profits of £825m for the year to 27 February, 19.7% lower than a year earlier even as UK like-for-like sales grew by 7.7% to £39.4bn and online capacity doubled.
That was after Tesco faced COVID-19 costs – including bonuses for staff – totalling £892m and also took a £535m hit on business rates relief handed back to the government.
The headline sales figures also stripped out fuel sales, which were down by £2.8bn, or 38%, as customers “travelled significantly less” due to pandemic restrictions.
Tesco said it had won customers “from all key competitors” with especially strong sales growth as customers stockpiled at the start of the first national lockdown last spring and again when tighter restrictions were imposed more recently.
The company said it expected some of the sales gains “to fall away as COVID-19 restrictions ease” in the coming year though forecasts coronavirus costs of just over £200m will take a smaller chunk out of annual profits.
Tesco chief executive Ken Murphy said: “Tesco has shown incredible strength and agility throughout the pandemic.
“By putting our customers and colleagues first we have built a stronger business.
“I’d like to say a huge thank you to the entire team for rising so selflessly to every challenge they’ve faced.
“Their efforts have been truly heroic.”
Shares fell 3% in early trading.
Tesco and other supermarkets have enjoyed strong sales over the past year, when they have been allowed to remain open throughout lockdowns unlike “non-essential” retailers.
They have also benefited from restaurants and pubs being closed, which means consumers having to eat at home rather than going out.
But costs such as staff sick pay, in-store measures to guard against infections and hiring extra workers have eaten into the store groups’ bottom lines.