July 1, 2020 / 6:55 AM / 15 days ago

New Sainsbury's boss debuts with lockdown boosted sales rise

LONDON (Reuters) - Sainsbury’s (SBRY.L) sales soared during Britain’s coronavirus lockdown last quarter, but the retailer cautioned it expects flat annual profits due to extra costs related to the pandemic.

FILE PHOTO: Simon Roberts, Retail and Operations Director of Sainsbury's, poses for a portrait at the company headquarters in London, Britain, May 1, 2019. REUTERS/Toby Melville

The group, whose CEO Simon Roberts succeeded company veteran Mike Coupe on June 1, said on Wednesday like-for-like retail sales rose 8.2% in the 16 weeks to June 27, with the lockdown and warm weather driving a 10.5% increase in grocery sales and a 10.7% surge at its Argos general merchandise business.

All of Britain’s big four supermarket groups - market leader Tesco (TSCO.L) Sainsbury’s, Morrisons (MRW.L) and Asda (WMT.N) - have seen grocery sales boosted by the lockdown as closed bars and restaurants have forced Britons to eat and drink at home.

But the largest two have benefited the most, with their networks of superstores complemented by strong online businesses and local convenience stores.

Sainsbury’s online grocery sales leapt 87%, accounting for nearly 17% of total grocery sales versus about 7% before the pandemic.

However, the group said it did not expect the current strong sales growth to continue.

It also forecast flat profit for its full 2020-21 financial year, with costs related to the pandemic - such as extra staff and reconfiguring stores for social distancing - expected to be more than 500 million pounds ($618 million), broadly offset by business rates relief and higher grocery sales.

Shares in Sainsbury’s were down 0.4% at 0829 GMT, extending 2020 losses to 9.6%.

“When I took this job back in January I didn’t expect of course all the events that have ensued since,” Roberts, who was formerly retail and operations director, told reporters.

He said his focus was on steering Sainsbury’s through the crisis rather than new strategic thinking.

The group will examine the impact of the changes in how customers are shopping.

“Inevitably, things on the other side of COVID will be different and we’ll be looking at those issues as we move forward. But four weeks into the job it’s too early to speculate,” he said.

While the pandemic has driven Sainsbury’s grocery sales, it has hammered demand for clothing and fuel, down 26.7% and 56.1% respectively in the quarter. It has also pushed its bank into a likely annual loss.

Last week, Tesco reported an 8.7% rise in its first-quarter underlying sales.

($1 = 0.8087 pounds)

Reporting by James Davey, Editing by Paul Sandle and Mark Potter

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