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Sainsbury's profit down 39% as COVID costs outweigh sales rise

Stock MarketsApr 28, 2021 09:40
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© Reuters. FILE PHOTO: A person walks past a Sainsbury's store in Milton Keynes

LONDON (Reuters) -British supermarket chain Sainsbury's reported a 39% fall in annual underlying profit on Wednesday as strong food sales during the COVID-19 pandemic were outweighed by extra costs and a decision to forgo business rates relief.

But Sainsbury's, the country's second largest supermarket group after Tesco (LON:TSCO), said it had started its new financial year strongly and forecast a big rebound in profit.

The company made an underlying pretax profit of 356 million pounds ($494 million) in the year to March 6, in line with its guidance of "at least" 330 million pounds but down from the 586 million pounds it made a year earlier.

Grocery sales rose 7.8%, general merchandise sales were up 8.3% and online sales doubled, but the company said it incurred an extra 485 million pounds in costs due to the pandemic.

It also returned business rates relief offered by the government worth about 410 million pounds.

Shares in Sainsbury's have increased 7.4% so far this year, partly buoyed by bid speculation after Czech billionaire Daniel Kretinsky increased his holding to 10%.

Sainsbury's three major domestic rivals - Tesco, Asda and Morrisons - have all enjoyed strong sales over the last year as coronavirus restrictions closed the hospitality sector for long periods and forced many people to work from home.

However, they have also had to endure the costs of additional workers, staff sick pay and in-store measures to deal with the pandemic.

Earlier this month, Tesco reported a 20% drop in annual profit, while last month Morrisons reported a halving of profit.

Sainsbury's said like-for-like sales, excluding fuel, rose 11.3% in its fiscal fourth quarter, having increased 8.6% in the third.

It said it was comfortable with analysts' consensus forecasts for underlying pretax profit in 2021-22 of about 620 million pounds.

"Like our customers, we are all looking forward to things feeling more normal over the coming months and getting excited about a summer of celebration, but we are also cautious about the economic outlook," Chief Executive Simon Roberts said.

Sainsbury's upgraded its four-year net debt reduction target from 750 million pounds to at least 950 million pounds and is paying a full-year dividend of 10.6 pence.

($1 = 0.7204 pounds)

Sainsbury's profit down 39% as COVID costs outweigh sales rise
 

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Comments (4)
Alamin Mia
Alamin Mia Apr 28, 2021 12:47
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ALAMiN
Family Aberman
Family Aberman Apr 28, 2021 9:34
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what Covid costs?our tax paid for any furlough. they could reduce staff at will. they could push property costing down.poor pricing, inefficient delivery service and sad excuse for management.
Elisabetta Bruno
Elisabetta Bruno Apr 28, 2021 9:34
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Let's see. Deliveries don't happen on their own. They had to have more people there so they could deliver, which is more costly than waiting for people to come to the store in their own car and do their own shopping. The government furlough scheme did not cover the entire salary, so any staff who got furloughed would have still been paid by Sainsbury's while not working (and I am not blaming anyone here, I am just explaining some of the costs).In-store stuff was working around the clock at the beginning of the pandemic and often insulted by self-entitled consumers who believed staff was hiding supplies from them.Supply chains were under a lot of pressure because of the virus and Sainsbury's (and other supermarkets) would have needed to make adjustments to replenish supply as much as possible.COVID was costly to all supermarkets. Everyone got blindsided by this pandemic.
Elisabetta Bruno
Elisabetta Bruno Apr 28, 2021 9:34
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p.s. Apologies for some mobile phone auto correct failures, such as "stuff" instead of "staff" and a few other bits.
Amir RJ
Amir RJ Apr 28, 2021 8:57
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good
Bledar Hajdari
Bledar Hajdari Apr 28, 2021 7:43
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Not true,this year has been the best by far .
 
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