ao link
Twitter
Facebook
Linked In
RSS
Login or Register
New to InternetRetailing?
Register Now
Internet Retailing
You are in: > Home > Themes > Industry

This is your 1 complimentary article for this month

Become a member for unlimited and immediate access.


Register
Already a member? Log in here

Despite doubling online sales, Sainsbury’s COVID costs see profits fall 39%

Linked InTwitterFacebookeCard
Sainsbury's:new dawn post COVID?
Sainsbury's:new dawn post COVID?
Sharelines

COVID safety costs see profits at Sainsbury's fall by a third, despite digital food and Argos sales growth. 2021/22 will be better, says CEO

Despite online sales going from 8% to 17% of total grocery and with Argos digital sales up 68%, Sainsbury’s has posted a 39% drop in underlying profits for 2020/21.

 

Strong food sales have been outweighed by the costs of rapidly adapting to being COVID-safe. Grocery sales rose 7.8% and general merchandise sales increased 8.3%, however the company said it incurred an extra £485m in costs due to the COVID-19 crisis. The retailer also declined business rates relief offered by the government, which was worth about £410m.

 

On a more positive note, the retailer has grown online groceries to 17% of total sales and has gained some market share in the fiercely competitive online grocery sector. Argos has also continued its transformation to offering a wider range and better delivery, which as seen its online sales rise 68%. The retailer has also improved the reach of Habitat, making it the retailers leading furniture and homeware brand.

 

As a result, Sainsbury’s says that it still expected underlying pre-tax profit in the 2021/22 year to rise and is comfortable with analysts’ consensus forecasts of around £620m.

 

Simon Roberts, CEO, says: “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.”

 

Roberts stresses that the company has a “bold three year plan” to put food back at the heart of the company and that work is already underway.

 

“We have accelerated our digital transformation this year as we focus on servicing customers however they want to shop with us. We have more than doubled online grocery sales and have done this while improving profitability,” he says. “Argos digital sales grew almost 70% and our Argos transformation plan is on track to improve customer availability while reducing costs.”

 

The experts weigh in

James Andrews, personal finance expert at money.co.uk, comments: "While supermarkets have been seen as among the winners of the pandemic - it’s not been without cost. Sainsbury’s profit hit shows just how much they’ve spent on Covid safety, up to £485 million, as well as the restructuring of Argos.

“It’s also shown how fast the move to online ordering has accelerated - with part of that £485 million spent on new slots and capacity added. “

 

He continues: “The outlook statement shows that this isn’t a flash in the pan, with extra capacity here for the long term and deals signed with the likes of Deliveroo not going away any time soon. However, Argos’s sales rising by 11% shows it’s restructure is one positive to come from the last quarter for Sainsburys."

 

Andrews concludes: “With fuel sales expected to be on the rise again too, we can expect continued strong performance - but competition from the likes of Aldi and Lidl hasn’t gone away. The following year for the industry will definitely be one to watch to see how the company reacts to society opening up, as well as how effective new price matching schemes will be."

 

Neil Shah, Director of Research at Edison Group, adds: "The company maintains an optimistic outlook, and investors should take confidence that the group anticipates increased underlying profit before tax in the upcoming financial year to align with forecasts of approximately £620million, as well expecting to reduce net debt by at least £950million by March 2023. Although the economic outlook remains uncertain, the easing of lockdown is set to benefit supermarkets as footfall will return to stores, whilst permitted travel should the drive fuel sales that have been sorely lacking."

 

Linked InTwitterFacebookeCard
Add New Comment
You must be logged in to comment.

The InternetRetailing Newsletter

A curated update containing news analysis, reports, podcasts and opinion - completely free and delivered three times weekly

Become a Member

Create your own public-facing profile
Gain access to all Top500 research
Personalise your experience on IR.net
Internet Retailing
We are the magazine, portal and research source for European ecommerce and multichannel retail, hosting the board-level conversation for retailers, pureplays and brands across all of our platforms. Join the conversation.

© InternetRetailing Media

Latest Tweet

Internet Retailing
Tamebay
eDelivery
Twitter
Facebook
Linked In
Youtube
RSS
RSS
Youtube
Google
Linked In
Facebook
Twitter