Tesco has revealed that its profits tumbled by around a fifth over the past year after coronavirus costs of almost £900 million offset surging sales.
The supermarket giant said on Wednesday morning that pre-tax profits slid to £825 million for the 12 months to February, compared with £1.03 billion the previous year.
It said profits were weighed down by £892 million in Covid-related costs and the company’s decision to hand £585 million in business rates relief back to the Government.
The bumper bill of pandemic costs was particularly driven by hiring staff to cover workers impacted by Covid-19 and investment in safety in stores.
Tesco hired almost 50,000 temporary workers during the pandemic, about 20,000 of whom have joined the retailer permanently.
It had benefited from a jump in demand for groceries during the pandemic, with more meals eaten at home amid restrictions on the hospitality sector and changes to working habits.
Group sales excluding fuel increased by 7% to £53.4 billion for the year, buoyed by soaring online sales.
Online sales jumped by 77% to £6.3 billion in the UK as the company doubled delivery capacity to meet rising demand from housebound customers.
The group said it has pumped significant investment into keeping its prices low in a bid to match its discount rivals, with Tesco launching its Aldi Price Match campaign last year.
It said it has made progress in the “value perception” among customers as a result.
Chief executive Ken Murphy said: “Tesco has shown incredible strength and agility throughout the pandemic.
“By putting our customers and colleagues first, we have built a stronger business.
“While the pandemic is not yet over, we’re well-placed to build on the momentum in our business.
“We have strengthened our brand, increased customer satisfaction and improved value perception.”
Donald Brown, senior investment manager at Brewin Dolphin, said: “Tesco’s results reflect the sometimes tricky position that supermarkets found themselves in over the last year.
“Although they have largely been able to trade through the last 12 months, this has come with significant extra costs.
“The dividend remaining protected, albeit unchanged from last year, is a positive sign and suggests management are relatively confident in the medium-term outlook.”
Shares in the company moved 3.1% lower to to 224.9p in early trading.