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Sainsbury's warns on £500m COVID hit from falling clothing sales and social distancing
30 April 2020

Sainsbury's has warned of a coronavirus hit of more than £500 million to the current year’s profits as it said social distancing measures together with sharp falls in clothing and fuel sales would offset its surging grocery trade.

The retail giant said the impact of COVID-19 is expected to leave underlying pre-tax profits broadly flat for the year to March 2021, despite £450 million in business rates relief.

It has scrapped its final shareholder dividend and said decisions on further payouts would be deferred until later in the financial year – a decision which comes after rival Tesco faced criticism for paying out £635 million.

Sainsbury’s full-year results showed a 2% fall in underlying pre-tax profits to £586 million for the year to 7 March.

On a statutory basis, pre-tax profits rose to £255 million from £202 million the previous year.

Presenting his last set of results before bowing out on 31 May, chief executive Mike Coupe said the past few weeks had been an “extraordinary time for our business”.

He said: “This is an unsettling time for everyone, but I am incredibly proud of the way the business has responded, continually adapting and responding to customer feedback.

“We will continue to work hard to provide food and other essential products to households across the UK and Ireland who are adapting to a new way of living.”

The group saw total grocery sales jump 12% in the seven weeks to April 25, compared with a 2% rise in the final quarter of its previous financial year.

Total grocery sales jumped as much as 48% higher in the week to 21 March as shoppers stockpiled ahead of the lockdown.

But total clothing and general merchandise sales, excluding at Argos, have suffered amid the lockdown, tumbling 53% and 22% respectively in the seven weeks to April 25.

The impact on its Sainsbury’s Bank financial services arm and weaker fuel sales, as well as the cost of measures to protect staff and customers, is expected to hit its bottom line.

It said its guidance was based on expectations that lockdown will end by the end of June, but that business disruption will continue until the end of its first half in mid-September.

The group cautioned the profits impact could be greater if lockdown is extended further into the summer and if there is a longer-term hit to the wider economy than expected.

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