The boss of Sainsbury’s has warned that disruption from the coronavirus outbreak will last until at least mid-September, and that physically distanced queues were likely to remain “for the foreseeable future”.
Mike Coupe, the chief executive of the UK’s second-largest supermarket chain, said the retailer would take a £500m profit hit from the costs of keeping staff and customers safe from the virus, such as protective kit and covering absences for up to a quarter of its staff who had been off sick or self-isolating in the early days of the pandemic. Coupe said about 15% of staff were still absent.
Despite the additional costs, Sainsbury’s said it expected profits for the year to be in line with City expectations because it was saving £450m in business rates under the government’s business aid scheme, and had also booked a surge in grocery sales as shoppers stockpiled in the runup to the lockdown restrictions.
Sales of groceries rose 12% in the seven weeks to 25 April, as shoppers prepared for lockdown and shifted to eating at home, but a 53% dive in clothing sales and 22% drop in sales of general merchandise in Sainsbury’s stores knocked back total sales growth for the group to 8%. Sales at the group’s Argos chain rose 9% as it benefited from sales of home office equipment.
Coupe said Sainsbury’s expected lockdown restrictions to have eased by the end of June but that business disruption would continue until mid-September.
“We are pretty certain that the arrangements we have in place for social distancing, such as devices in checkouts will remain in place for the foreseeable future,” Coupe told BBC Radio 4’s Today programme on Thursday.
Sainsbury’s is currently assuming a return to normal grocery sales after September. It said grocery sales were likely to rise by less than 5% from now until then but sales at Argos were likely to fall by about 13% as most of its stores remained closed.
Sainsbury’s financial services group is expected to make a loss because of an anticipated rise in bad debts due to higher unemployment and the loss of commission from travel money kiosks and cash machines, usage of which has dropped dramatically.
The company said it was deferring a decision on its dividend and had cancelled its executive bonus scheme for the year. Directors have not taken a cut to basic pay.
Pre-tax profits rose 26% to £255m in the year to 7 March, despite flat sales of £32.4bn.
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