Coronavirus: Tesco could take £925m hit on extra staff and delivery costs
Tesco warned it could take a hit of up to £925m due to the impact of hiring extra staff and ramping up distribution due to the coronavirus outbreak.
The supermarket this morning said it expects retail costs to increase by between £650m and £925m, but said the sales boost caused by stockpiling and business rates relief of around £585m – could largely offset the impact.
Chief executive Dave Lewis defended a pay out to shareholders of more than £900m, saying the dividend reflected last years performance and that the balance sheet was strong.
Tesco has hired around 45,000 employees to cope with soaring demand, driving the increase in retail costs.
In total, around 50,000 members of staff are currently off sick or self-isolating. However, sick leave levels have started to decline, Lewis said.
Stockpiling across the country contributed to a 30 per cent uplift in sales in the first weeks of the crisis.
Panic buying levels were greatest in London and the south of England and among more affluent customers, with 10 per cent of customers purchasing 30 per cent of the volume.
The supermarket sold over 6m packs of beans, 3.3m tins of tomatoes and 3.6m packs of toilet roll as customers stockpiled.
However, other parts of the business were negatively impacted by the outbreak. Clothing and fuel sales are both down 70 per cent and wholesaler Booker suffered after restaurants were forced to close.
Tesco said that panic buying had reduced and service levels were returning to normal, as it published its full-year results.
In the full-year to the end of February the grocer suffered a one per cent slump in group sales to £56.5bn and operating profit before exceptional items was £2.95bn.
Tesco chief executive Dave Lewis said: “COVID-19 has shown how critical the food supply chain is to the UK and I’m very proud of the way Tesco, as indeed the whole UK food industry, has stepped forward. In this time of crisis we have focused on four things; food for all, safety for everyone, supporting our colleagues and supporting our communities.
“Initial panic buying has subsided and service levels are returning to normal. There are significant extra costs in feeding the nation at the moment but these are partially offset by the UK Business rates relief.
“Tesco is a business that rises to a challenge and this will be no different. I would like to thank colleagues for their unbelievable commitment and customers for their help and understanding. Together, we can do this.”