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Coronavirus Hit To Annual Profits Could Be $623 Millionm Says Britain’s Sainsbury’s


04/30/2020


Coronavirus Hit To Annual Profits Could Be $623 Millionm Says Britain’s Sainsbury’s
One of the largest supermarket retail chains of Britain - Sainsbury’s, issued a stark warning for profits for the current year and said that corornavirus pandemic could hit the company by more than 500 million pounds ($623 million). The company also announced deferment of any dividend payment decisions until later this year.
 
The hit to the company’s profit for the current year because of the coronavirus pandemic crisis could also broadly get cushioned by stronger grocery sales and about 450 million pounds in business rates relief from the government, said the second largest supermarket chain of the United Kingdom. 
 
Analysts calculated that the underlying pretax profit for the year to March 2021 for Sainsbury’s will be more or less the same as the 586 million pounds that was reported on Thursday by the company for the 2019-20 year.
 
The basis of the base case assumption of the company with respect to the UK is the presumption that the current restrictions would be lifted by the end of June. However it is likely that business disruptions will continue until mid-September. The calculations also assumed that weaker economic conditions after the lifting of the lockdown will also impact the consumer demand, particularly for general merchandise and clothing.
 
“This is not guidance, this is a base case, it is heavily caveated and we would be the first to acknowledge that there are a whole series of scenarios both ways that can make it better or worse,” Chief Executive Mike Coupe told reporters.
 
Coupe is set to retire as CEO on May 31 and will be replaced by Simon Roberts, the current retail and operations director.
 
The company said that lower financial services profitability, costs related to the social distancing and safety measures to protect customers and staff and the weaker demand for fuel, general merchandise and clothing will d=significantly hit the profits of the company. 
 
More negative scenarios in stress-testing its financial viability had been used by it, Sainsbury’s said.
 
“Even with additional stress, we are confident that we have sufficient cash and committed funding in place to meet our obligations for the foreseeable future,” it said.
 
The company believed that it was but prudent to defer any dividend payment decisions until later in the financial year because of the wide range of potential profit and cash flow outcomes, Sainsbury’s said. The company believes that within the next few months, the direction of the health crisis and the economic impacts would become clearer.
 
An estimated hit of up to 925 million pounds because of the costs of dealing with the pandemic was made by Tesco earlier this month. The largest supermarket chain of the UK also defended its decision to pay investors a 635 million pound dividend even as it also accepted business tax relief from the UK government.
 
Sainsbury’s said group sales were flat at 32.4 billion pounds in its year to March 7. In the seven weeks to April 25, there was a 12 per cent increase in grocery sales but a slump of 53 per cent in clothing sales and a 52 per cent drop in sake of fuels as reported by the company.
 
(Source:www.metro.us)


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