Sainsbury's expects to take £500m hit due to pandemic

Some Sainsbury’s stores may have to close as non-food demand falls and the grocer spends on facilitating social distancing

Written by Georgie Dobie

Posted 01.05.2020 | Retail

Sainsbury's expects to take £500m hit due to pandemic thumbnail

Sainsbury's expects annual profits to take a £500m hit due to the cost of remaining open during the outbreak. And, if the situation worsens, Britain’s second-biggest supermarket chain may have to close some stores.

Sainsbury’s, which also owns Argos, said its annual earnings would be impacted due to the cost of keeping customers and staff safe during the pandemic. The retailer also said that a lower demand for fuel, clothing and general merchandise would affect earnings for the year ahead. 

The Government’s temporary business rates holiday would help offset the loss – in its case to the tune of £450m – and so too would stronger grocery sales, meaning overall little change in the group's bottom line. 

Like its competitors, sales grew ahead of the UK-wide lockdown, and were also initially ahead at Argos – though following the closure of all its standalone stores, business has since been negatively impacted. 

Sainsbury's has said that if the situation worsens – if the level of social distancing measures and staff absences were higher than it expects them to be – it might have to "restrict the number of sites that we are able to keep open and/or services we are able to offer". That is to say, in plain terms, it may have to close some of its stores.  

The details were given as the supermarket published its annual results. The results showed a 26 per cent rise in full-year profits to £255m for Q1 2020; though like-for-like sales dipped 0.6 per cent over the year. Sainsbury’s shares have fallen by 4.5 per cent. 

Sainsbury's said the ongoing impact of the pandemic remained uncertain. It is working on the basis that the lockdown will start to ease by the end of June, but that its business will continue to be disrupted until mid-September. 

The company said: "We additionally assume that consumer demand, particularly for general merchandise and clothing, will be impacted by weaker economic conditions thereafter." 

But it has deferred decisions on its dividend payout until later in the financial year – following the criticism that Tesco faced for paying out £635m having benefited from the tax break. 


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