Tesco said that impact of the coronavirus will lead to an increase in operating costs of between £650m and £925m, largely due to increased staffing levels to cope with employee absence.
The UK supermarket chain said that if customer behaviour returned to normal by August, the additional costs “would be largely offset by the benefits of food volume increases, 12 months’ business rates relief in the UK and prudent operations management”.
Tesco added that it expects a reduction in income at its banking operation and increased provisions for bad debts, which will probably result in a loss at the bank for the year to February 2021.
The spike in buying by consumers in the early stage of the crisis resulted in a 30 per cent uplift in sales volumes, but Tesco said this has now stabilised and “more normal sales volumes are being experienced”.
For the year to February 2020, the group reported a pre-tax profit of £1.32bn, down 18 per cent from the previous year. It declared a final dividend of 6.5p a share, above many analysts’ expectations.
Tesco shares fell 4 per cent on Wednesday morning.