The boss of Sainsbury’s has said disruption from the coronavirus outbreak will last until at least mid-September, and that physically distanced queues are 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 by providing 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 ahead to be in line with the year just completed because the retailer 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 run-up 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, who is to step down as chief executive in June and leave the company in July, said Sainsbury’s expected lockdown restrictions to have eased by the end of June but that business disruption would continue until mid-September.
Coupe said: “There could well be some social distancing in place for the rest of the calendar year.” He said that spending on “big ticket” items, such as furniture and large kitchen appliances, was also likely to be affected throughout the year as families were hit by a slowdown in the economy.
Coupe also said the shift to online shopping appeared to have been accelerated by the pandemic. Sainsbury’s has increased its grocery home delivery and click & collect slots by about 50% in the past three weeks as it responded to demand. Coupe said: “Customers have got used to a different way of shopping.”
Sainsbury’s financial services arm 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.
Sainsbury’s is currently hoping for 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.
Coupe said he did not expect to see major shortages in stores and there was “more than enough food to go around”. He said that during panic-buying in March, Sainsbury’s had sold more food than its peak Christmas trading day on five consecutive days. “No supply chain anywhere is going to be able to deal with that uplift,” he said.
“The food supply chain has been incredibly resilient in probably the most testing circumstances I will ever see in my lifetime,” Coupe said.
He insisted it had been possible to do a full weekly shop even a week after grocery sales ballooned 48% in the week to 21 March.
The company said it was deferring a decision on paying its dividend, due in July, and had cancelled its executive bonus scheme for the year. Directors have not taken a cut to basic pay and no staff have been furloughed under the government’s job protection scheme.
Pre-tax profits rose 26% to £255m in the year to 7 March, despite flat sales of £32.4bn and a 0.6% fall in sales at established stores.
In the year ahead, Sainsbury’s said it planned to close eight supermarkets but would open two new ones. Coupe said the company also expected to close some convenience stores and Argos outlets as shoppers shifted further online.