Tesco set to reveal impact of pandemic on bottom line despite sales boost

Tesco’s profits are likely to take a hit after the UK’s biggest retailer counts the cost of hiring more staff and ramping up its online operation in response to the pandemic.

Britain’s big grocers, including Tesco, have benefited from their 'essential' status, with stores remaining open throughout the health crisis, although they have faced additional costs. Picture: Andrew Milligan/PA Wire

Full-year results, due this week, will reveal the impact of the massive investment on the grocery giant’s bottom line.

That financial hit comes as Tesco saw its share of the UK grocery market rise for the first time in more than four years in February, according to consultancy Kantar Worldpanel, while the retailer’s festive trading update highlighted record sales.

Britain’s big grocers have benefited from their “essential” status, with stores remaining open throughout the health crisis, although they have faced additional costs.

Sophie Lund-Yates, equity analyst at financial services firm Hargreaves Lansdown, said: “It’s been a pretty exceptional year for this supermarket giant [Tesco].

“Navigating mammoth changes in demand patterns that come with a pandemic, hiring an army of new staff and going full throttle on online expansion, all mean profits aren’t going to be stellar for the full year. Analysts expect operating profit to fall around 37.5 per cent.

“It’s important to focus on the longer-term picture. We’d like to know what expectations are for margins. As the group continues to ramp up investment, we wonder what that means for the operating margins (currently around 4.2 per cent) Tesco worked so hard to rebuild.

“One of the biggest threats for all the grocers is enormous competition. That means we’ll be looking closely for any commentary on trading in the run up to Easter.”

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