Sainsbury’s delays dividend as coronavirus costs expected to reach £500m
Sainsbury’s has delayed a decision on its dividend and warned that it will take a £500m hit due to costs associated with coronavirus, but that soaring grocery sales and business rates relief will largely offset the impact.
The supermarket said this morning that it faces costs associated with protecting customers and staff, weaker fuel, general merchandise and clothing sales and lower financial services profitability.
In the seven weeks to 25 April, grocery sales were up 12 per cent and total general merchandise sales increased by three per cent, driven by transactions at Argos as customers prepared for home working.
But clothing sales dropped 53 per cent and fuel sales plunged 52 per cent during the same period.
However underlying profit before tax is expected to be broadly unchanged year on year. This is due to a jump in grocery sales during the coronavirus lockdown and around £450m of business rates relief.
Sainsbury’s is working on the predicted scenario that restrictions will begin to ease by the end of June, but that business will continue to be disrupted until the end of the first half in mid-September.
It said it expected weaker clothing and general merchandise sales to continue due to the weaker economic conditions.
“However, given the wide range of potential profit and cash flow outcomes, the Board believes it is prudent to defer any dividend payment decisions until later in the financial year, when there will be improved visibility on the potential impact of COVID-19 on the business,” the grocer said.
Chief executive Mike Coupe said: “The last few weeks have been an extraordinary time for our business.
“First and foremost, I want to say thank you to all of our colleagues. They have shown outstanding commitment and resilience over the past few weeks and I am in awe of their adaptability and the efforts they have made to continue to serve our customers.
“Across every part of the business, colleagues have played their part as we have done everything possible to feed the nation and to prioritise those who are least able to access food and other essential services.”
More to follow.