Sainsbury’s sales soar but Covid bill hits £485m

Supermarket Sainsbury’s enjoyed a strong boost in sales thanks to its position as an essential retailer during the year of Covid.

Sales in the 12 months to March 6 jumped 7.8%, including an 8.3% rise in non-food business as shoppers were unable to head to non-essential retailers for large parts of the year.

But £485 million in Covid-related costs and a major restructuring that saw around 1,150 jobs affected, sent the business to a £261 million loss for the year.

Looking ahead, chief executive Simon Roberts said he believes the new hybrid working model will see an increase in sales from stores on residential high streets and also expects the gains in online shopping to become permanent.

Sainsbury’s grocery sales were up 7.8%, helped by a 120% rise in online orders.

At the company’s Argos business, sales jumped 10.9%, including a 68% increase in digital sales.

But less travelling meant Sainsbury’s fuel sales slumped 45%, contributing to overall revenues hitting £29 billion in the year to March 5, up 0.2% on a year earlier.

Like much of the high street, and despite remaining open throughout the year, clothing sales dropped 8.5%, including a 26.7% plunge in the three months between March and May 2020.

Bosses said clothes sales are starting to recover, however, with a 4.2% rise in sales in the past three months.

Chief executive Mr Roberts also revealed that, despite the high Covid-19 costs, the supermarket will still pay out a dividend to investors of 7.4p a share, up from 7.3p a share a year ago.

He said: “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.

“Our full-year direct Covid-19 costs were £485 million, leading to a 39% decrease in full-year underlying profit.

“We are pleased to propose a full-year dividend which is in line with last year, protecting shareholder income from the full impact of Covid-19 on profits.”

“As customers find new ways of hybrid working that will inevitably mean some of the week working from home and some of the week working from offices,” he said.

“We believe that convenience stores will play a big part in the local community and the vast majority of those stores are in exactly those types of locations in the heart of the community.

“We think those stores in the local community will be really important locations for customers as they work and live and shop differently.”

Local stores in less urban locations have seen sales up 13% in the year, he added.

Stores in office locations have struggled; however, Mr Roberts pointed out that there are far fewer in those locations than elsewhere.

He also said he expects the company’s own organisation to work in a more hybrid way.

He added: “I think the likelihood of everyone going back to the office five days a week is not going to happen.

“Looking ahead there will be a hybrid approach, and our convenience estate in the main is well positioned to reflect those changes.”

Sainsbury’s also expects to benefit from a summer celebration as lockdown restrictions ease and 400 new products for barbeques and parties are set to be launched.

However, Mr Roberts admitted the strong sales of alcohol seen as a benefit of pub closures are unlikely to remain as high once the hospitality sector reopens.

“There’s been a significant uplift in alcohol sales and we think, of course, that will shift the balance of consumption when pubs reopen.”

Online sales may also slip slightly, but Mr Roberts said he expects this to be minimal.

“I think we’ve seen a permanent shift in the fact that more customers will shop online,” he said.

“As we come out of the lockdown, there will be some reduction in online volume but I think largely we will hold on to the majority of what we’ve gained.”