Image Source: Jonathan Billinger
Chloe Shakesby

Sainsbury's profits drop 40% after £485m of Covid costs hit

UK supermarket Sainsbury’s has reported that profits dropped by nearly 40 per cent last year due to more than £400m of Covid-19 costs.

Sainsbury’s, which has more than 1,000 stores across the UK, saw profit before tax drop by 39 per cent in 2020, falling from £586m to £356m.

The company, which also owns catalogue retailer Argos, said that the decrease was despite “strong” sales growth, which was offset by £485m of direct Covid-19 costs.

Digital sales during the year grew by 102 per cent, with sales in its grocery division up by 7.8 per cent and general merchandise sales up by 8.3 per cent.

However, fuel sales decreased by 39.1 per cent, dropping from £4.9bn to £3bn during the period.

This comes after the chain’s announcement in November that it was aiming to put food “back at the heart” of its operations.

Simon Roberts, chief executive of Sainsbury’s, commented: “Above all else, I want to recognise the extraordinary job that my colleagues have done over the last 12 months.

“Their efforts have been nothing short of heroic as our entire team went above and beyond every day for our customers and communities.

“I am enormously grateful to the whole team for the way they have risen to the huge challenges this year and so selflessly looked after our customers and each other.

“We have put our colleagues and customers first every step of the way and, as a result, delivered industry-leading safety in our stores and record levels of customer satisfaction.

“In a year like no other, our industry has stepped up and worked tirelessly across food supply chains to feed the nation and we are very proud of the part Sainsbury’s has played.

“I also want to especially recognise our suppliers for all their support and partnership throughout this year in keeping goods flowing for our customers. They have done a fantastic job.

“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 per cent 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.

“We have a bold three-year plan to put food back at the heart of Sainsbury’s and drive improved performance.

“We are transforming the way we work and I am encouraged by how all of our teams have responded and the early momentum and performance towards our plan.

“We have accelerated our digital transformation this year as we focus on serving customers however they want to shop with us.

“We have more than doubled our online grocery sales and have done this while improving profitability.

“Argos digital sales grew almost 70 per cent and our Argos transformation plan is on track to improve customer availability while reducing our costs.

“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.

“While there is much that we cannot predict in the year ahead, we are absolutely focused on delivering for our customers and shareholders.”

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