LONDON (AP) - Tesco, the UK’s largest supermarket, announced on Wednesday that its profits fell by a fifth over the past year as higher costs related to the coronavirus pandemic, such as hiring more staff, made it “exceptional strong “sales growth.
The company announced that its pre-tax profit for the year ended February decreased to £ 825 million ($ 1.14 billion) from just over £ 1 billion a year earlier.
Profits have been weighed down by £ 892 million worth of COVID-related costs, including the need to hire staff to cover workers affected by the virus. Tesco said it hired nearly 50,000 contract workers during the pandemic, around 20 of them.000 have permanently joined the retailer. The company also had higher costs associated with keeping its stores safe. Profits were also hurt by Tesco’s decision to return tax breaks of £ 585 million to the UK government. At the start of the pandemic that hit the UK in March 2020, the government offered financial assistance to all types of businesses, but some, particularly those in the grocery retail sector, returned the money as their sales grew during the series of lockdowns in the country.
Like others, Tesco benefited from an increase in food demand during the pandemic, with more meals being eaten at home,as the hospitality sector was restricted and work habits changed.
In its annual earnings statement, Tesco said non-fuel sales rose 7% to £ 53.4 billion, while UK online sales rose 77% to £ 6.3 billion, with the company doubling delivery capacity to match the increase To meet demand from homebound customers.
“Tesco has shown incredible strength and agility throughout the pandemic,” said CEO Ken Murphy. “While the pandemic is not over yet, we are well positioned to build on the momentum of our business.”
Tesco’s share price fell around 1.5% after the update as some investors were disappointed with the earnings forecast. Tesco saidhis “best guess at this point” is that retail operating income will recover to a similar level to fiscal year 2019-20, the year before the pandemic.
“We suspect this may turn out to be an overly cautious forecast, but as of today this has clearly disappointed the market,” said Nicholas Hyett, stock analyst at Hargreaves Lansdown.
The Seattle Times does not thread commentary on stories from news outlets like Associated Press, New York Times, Washington Post or Bloomberg News. Rather, we focus on discussions among our own employees about local stories. You can find more information about our Community Guidelines herethat retail operating income will recover to a similar level to fiscal year 2019-20, the year before the pandemic..