Sainsbury’s has reported it could close stores if the £500 million cost of the pandemic grows any bigger.

The supermarket chain said today that its sales had grown in the weeks before lockdown but since that date the costs of ensuring safe social distancing measures and a drop in demand for non-food had hit the overall profits for the business.

It said it expects this to be reflected in a £500 million hit to its next annual profits, and it added that it might have to close stores if this figure escalates. It also noted it expects coronavirus disruption to last until at least mid-September.

Sainsbury’s published its annual results today, which showed a 26% rise in full-year profits to £255 million for the year to March 7, 2020, although it said like-for-like sales dropped 0.6% over the 12 months.

Looking ahead, the company, which is the UK’s second biggest supermarket chain and owner of the Argos brand, said its earnings are continuing to be hit by the costs of keeping its customers and staff safe.

It is also dealing with lower income for fuel, clothing and general merchandise, although this is being offset by the government’s temporary business rates relief during the crisis – amounting to around £450 million – in addition to stronger grocery sales.

Chief executive, Mike Coupe, said during panic buying in March, Sainsbury’s sold more food and drink than its peak Christmas trading day on five consecutive days. 

He said: “No supply chain anywhere is going to be able to deal with that uplift. The food supply chain has been incredibly resilient in probably the most testing circumstances I will ever see in my lifetime.”

However, he said the expense of social distancing measures and also the costs of covering staff absences – for those who have been off sick or a self-isolating – has hit the business more than it expected.

Coupe added: “There could well be some social distancing in place for the rest of the calendar year.”

Coupe is to step down as chief executive in June and will leave the company in July.