Tesco reports increased costs due to coronavirus crisis
Tesco has said its operating costs could rise by between £650 million and £925 million in the current financial year due to the coronavirus pandemic.
The supermarket has seen significant increases in its payroll, distribution and store expenses throughout the crisis.
Dave Lewis, Tesco chief executive, said: “Covid-19 is having a material impact on the operations of our business and we are incurring significant additional costs, particularly in payroll as we recruit additional colleagues to meet demand and cover the work of those colleagues who are absent and being paid.”
However, Tesco said the cost uplift could be largely offset by increased sales, twelve months’ business rates relief and prudent operations management if customer behaviour was to return to normal by August.
Panic buying in the first few weeks of the coronavirus outbreak led to a 30% uplift in the supermarket’s UK sales and cleared its supply chain of some items.
Tesco said the ongoing nature of the crisis meant it was unable to provide financial guidance for 2020/21 at this stage.
Lewis added: “Whilst the full financial impact of the crisis for 2020/21 is impossible to predict with a high degree of certainty, we have considered a range of scenarios to understand potential outcomes on our business and plan appropriately.”
Tesco has also reported that operating profit before exceptional items rose by 13.5% to £2.96 billion in the 52 weeks to 29 February.
Lewis said: “Over the last five years we have focused on serving customers better, re-engaging our colleagues, completely resetting our relationships with our suppliers and as a result we have been able to add value for our shareholders. These endeavours put us in a strong operational and financial position to deal with the challenges of Covid-19.”
