Panic-buying boosted Tesco sales by 30% – as bosses reveal coronavirus may cost retail giant up to £925m but it could STILL make a profit thanks to £700m government tax break
- Britain’s biggest retailer says annual pre-tax profits hit £1.3billion in past year
- CEO Dave Lewis warns coronavirus could cost £925m with 45,000 new staff
- But supermarket will get a tax holiday from Government worth up to £700m
- And surging sales are predicted to continue for at least another four months
- Tesco sold record amounts of baked beans, chopped tomatoes and toilet roll
- 10% of shoppers in the wealthy south-east bought 30% of all UK products
By Martin Robinson, Chief Reporter For Mailonline
Published: | Updated:
Tesco’s decision to accept a controversial £700million Government tax break despite enjoying a 30% monthly sales boost because of the coronavirus crisis has been branded an ‘absolute scandal’ today.
Britain’s biggest retailer also revealed its annual pre-tax profits hit £1.3billion in the year to February and its shareholders will paid dividends worth £635million.
There are growing calls for the Treasury to rethink its taxpayer-funded 12-month business rates holiday for Britain’s largest supermarkets, who will together save an estimated despite stores remaining open and sales rising fast.
Tesco’s CEO Dave Lewis has revealed that stockpiling in recent weeks cleared its supply chain of certain items such as baked beans, chopped tomatoes, toilet roll and hand soap, with overall sales jumping by almost a third in March alone.
He has also forecast the coronavirus crisis will cost them between £650million and £925million over the coming 12 months.
But Mr Lewis admitted they could still turn a profit because of a controversial £700million tax break from the Government and continuing high sales through the summer if the lockdown continues.
Rushanara Ali, the Labour MP for Bethnal Green & Bow, told The Times: ‘It’s an absolute scandal that the government is providing a £700million tax break to Tesco while millions of self-employed and freelance workers, even those who qualify, cannot get any money until June.
Shoppers in face masks leave a Tesco in north London last month as sales rose 30% in a month because of stockpiling
Empty shelves in Tesco stores, including this one in Ongar, Essex, were a common scene last month with 10% of shoppers in the wealthy south-east buying 30% of all UK products in March
‘Then there are 2.2million people who don’t even qualify for anything, along with millions of people who live in poverty.
‘If there is a case for supermarkets getting some help, we need to see what the evidence is for that, but those who are doing extremely well and whose profits are increasing should not be qualifying for a business rates holiday when others desperately need it.
Britain’s supermarkets have seen a surge in demand as shoppers have stocked up on essential goods such as toilet roll and pasta during a lockdown to contain the spread of the virus.
Tesco’s delivery service, pictured at work in Surrey, cannot cope with shoppers urged to still head to stores to stock up
Industry data last week showed UK grocery sales leapt more than a fifth to a record £10.8billion in the four weeks to March 22.
Sainsbury’s is first supermarket to lift rationing measures by stopping three-item limit on thousands of products
Sainsbury’s is the first supermarket to lift buying limits on thousands of products as Britain’s lockdown continues but essential items will still be rationed.
Panic buying had placed supermarkets across the country under enormous pressure as Covid-19 spread across the country, with many supermarket websites crashing in the hours after Boris Johnson announced a lockdown two weeks ago.
Sainsbury’s put a cap on its products, limiting them to three-per-customer, with more sought after essentials such as toilet roll, tinned goods, bread and milk, being limited to two.
Mike Coupe, CEO of the supermarket giant, wrote to customers today to say: ‘You wrote to tell me that product limits were a barrier to being able to shop for other people.
‘We understand that it can be difficult to buy what you need and shop for someone else with the 3 item product limit. We have now lifted buying restrictions on thousands of products and hope that this will help more of you to shop for others.’
However, the crisis has come with higher costs, such as social distancing measures that restrict the number of shoppers in store at any one time, expanding online delivery operations, staff bonuses and hiring more employees.
Tesco’s wholesale business is also likely to have been hit hard by the closure of restaurant and cafe customers.
The company has recruited 45,000 more staff members in the past two weeks in a bid to cope with soaring demand.
Numerous workers have been appointed as drivers and pickers to help expand its delivery business.
Dave Lewis, chief executive of Tesco, stressed that ensuring deliveries can be made to the most vulnerable customers is a ‘live issue’, with the Government providing the supermarket with an initial list of 110,000 people to reach out to.
The retailer said it has increased its number of home delivery slots by around 20% to 805,000 a week, with plans to increase this further.
Mr Lewis said: ‘On the shop-floor I’ve seen a greater amount of change in the last two weeks than for probably about the last 10 years.’
Tesco said no member of staff has been furloughed but 50,000 staff are currently absent on full pay.
Mr Lewis added: ‘Covid-19 has shown how critical the food supply chain is to the UK and I’m very proud of the way Tesco, as indeed the whole UK food industry, has stepped forward.
‘Initial panic-buying has subsided and service levels are returning to normal.
‘There are significant extra costs in feeding the nation at the moment but these are partially offset by the UK business rates relief.
‘Tesco is a business that rises to a challenge and this will be no different.’