Covid costs stifle profits at Tesco

It has been a historic year for supermarkets, and Tesco is no exception: the British market leader saw its sales rise by almost 9 %, but the extra costs were so high that profits fell by around 20 %.

Online doubled

Tesco’s annual figures reveal 2020 has been an exceptional year: in the 52 weeks leading up to 27 February, the British retailer saw its online turnover increase by no less than 77 % to 6.3 billion pounds (7.2 billion euros). This was possible thanks to doubling the number of delivery slots to 1.5 million a week. 

To make it all work, the chain had to hire close to 50,000 extra workers, of whom 20,000 are now even given permanent contracts. At the same time, two new online fulfilment centres were built within Tesco’s existing hypermarkets.

The group looks back with satisfaction on a year in which it said it had demonstrated “incredible strength and agility“, CEO Ken Murphy told British newspaper The Guardian. “We have strengthened our brand, increased customer satisfaction and improved value perception. We have doubled the size of our online business and through Clubcard, we’re building a digital customer platform.”

More costs than profits

Nevertheless, the growth is taking its toll. In the United Kingdom alone, Tesco had to incur 892 million pounds (a billion euros) in additional costs. This was due, for example, to replace ill staff or to implement the necessary safety measures. As a result, profits fell by almost 20 % last year to 825 million pounds (950 million euros).

Tesco did receive 535 million pounds of state aid in the form of reduced corporation tax, but the retailer was morally obliged to repay that amount in full after it paid out 315 million pounds in dividends to shareholders in October.