Tesco sales up 8.2% for lockdown quarter

Tesco has announced its total sales increased by 8.2% to £13.4 billion in the first sales quarter of 2020, but it warned that coronavirus-related costs were set to hit £840 million this year.

It said growth was most marked in online with sales up 48.5% for the quarter as a whole [13 weeks ending May 30] and rate of growth increasing to nearly 100% by the end of May.

Within its stores it said customers have been buying more food but making fewer shopping trips during the coronavirus pandemic. Trips made by shoppers fell nearly a third over the period but the amount of food bought rose by 64%.

In a statement the company said: “Responding to the significantly increased demand for our online offer, we have grown that part of our business as quickly as possible.

“In just five weeks we doubled our online capacity and are now fulfilling over 1.3 million orders per week. Across the quarter as a whole, we delivered 12.6 million orders, including to a priority list of 590,000 vulnerable customers.

“In addition to providing more delivery slots for customers, we have also increased the availability of our click and collect service, which now represents around a quarter of online orders.

“As a result of the changes we have made, our online grocery business has grown from around 9% to over 16% of our total UK sales.”

Tesco said however, that its response to Covid-19 has required significant changes to its operations, which have led to a “substantial increase in costs”, with the main impact in the UK.

It said: “The majority of these costs relate to payroll which includes the provision of twelve weeks’ paid leave to 26,000 vulnerable colleagues, in addition to the recruitment of 47,000 temporary colleagues to cover absence and meet increased demand.

“We have also incurred costs in areas such as distribution, where we have needed to re-open previously mothballed distribution centres and property, where we have incurred costs to adapt the store environment and temporarily lost tenant income.

“The provision of safety-related consumables and personal protective equipment across all of our 3,628 stores in itself results in a charge of around £65 million. In total, our latest estimate of incremental costs for the UK for the full year is approximately £840 million. These costs will be partially mitigated by the UK business rates relief of £532m and a contribution from additional food sales.”

For convenience its UK Tesco Express and One Stop businesses grew by 9.9% over the period while its Booker retail partners (Premier, Londis, Budgens) saw growth of 23.5%.

Dave Lewis, Tesco’s chief executive, said: “Through a very challenging period for everyone, Tesco colleagues have gone above and beyond, and I’m extremely proud of what they’ve achieved. Their selfless efforts, combined with our embedded strategic advantages in stores and online, have helped to ensure that everyone can get the food they need in a safe environment.

“In just five weeks, we doubled our online capacity to help support our most vulnerable customers and transformed our stores with extensive social distancing measures so that everyone who was able to shop in store could do so safely.

“The costs of doing this have been significant and only partly offset by business rates relief and increased volume. We see the balance as an investment in supporting our customers at a time when they need it most.”

Looking ahead Tesco said the main priority is to ensure the safety of its customers and colleagues, and the consistent availability of food.

It expects its retail operating profit in the current year to be at a similar level to 2019/ 20 on a continuing operations basis [based on an assumption of a continued easing of lockdown restrictions in the UK].

Related articles: