- Tesco expects the running costs to increase by £650 million to £925 million due to Coronavirus.
- The largest UK retailer hopes to sustain its final dividend that currently amounts to £635 million.
- The supermarket group hires 45,000 workers in two weeks to cope up with the rising demand.
In its statement on Wednesday, UK’s largest retailer, Tesco PLC (LON:TSCO), said that it expects a massive £650 million to £925 million hit due to the ongoing Coronavirus pandemic. The retailer also said that the rising uncertainty ascribed to the health crisis makes it impossible for the company to give meaningful profit guidance for fiscal 2020.
According to the supermarket group, if business returns to usual by August, higher sales can be expected to offset the additional retail expenses including logistics and staff-related costs. The retailer also cited the recently introduced business tax waiver by the British government to support its quick recovery after the crisis.
Tesco Bank Expects To Remain In Loss In 2020-21
The Tesco Bank, however, warned on Wednesday that it is likely to quit the profit zone for 2020-21 due to a significant decline in its income from multiple sources including loans, credit cards, and travel money.
CEO Dave Lewis also commented on Wednesday and said that it is justified for Tesco to accept £585 million worth of relief on business rates from the taxpayers in the United Kingdom, while sustaining its final dividend that currently amounts to £635 million.
Lewis further added that dividend is aimed at rewarding Tesco’s large and small shareholders, many of whom are dependent on the income. He said:
“Whilst we appreciate that this may not be the case for a number of sectors or industries where there may not be any choice but to suspend dividends and preserve cash, we are in a strong position to pay out. We believe that it is right to do so.”
Following the announcement, Tesco was reported trading 4% down on Wednesday that extended its overall decline in 2020 so far to 16%. The retailer, however, is still outperforming the benchmark FTSE-100 index. At the time of writing, Tesco is valued at £20.95 billion and has a price to earnings ratio of 15.97.
Tesco Hires 45,000 Workers In Two Weeks
Tesco also accentuated that it has hired 45,000 new workers in the UK in the past two weeks to cover for its employees that are on sick leaves and to cope up with the sharply rising demand. Tesco’s website reports the retailer to employ roughly 320,000 people in the United Kingdom. As per the CEO, around 55,000 workers are currently absent from work.
Tesco boasts a 27% share in the UK grocery market and operates around 3,800 stores in Ireland and UK combined. In the financial year 2019-20, the retailer announced a 14% increase in operating profit (excluding one-off items) to £2.96 billion that was in line with the analysts’ forecast.