Tesco coronavirus efforts hailed by analyst

By Rod Addy contact

- Last updated on GMT

Among other initiatives, Tesco has supplied more than £1m for stores to support local community causes
Among other initiatives, Tesco has supplied more than £1m for stores to support local community causes

Related tags: Supply chain, Finance

Tesco “deserves immense credit and thanks” for its “almost military-like programme of work” surrounding the coronavirus crisis, according to Shore Capital head of research Clive Black.

Following up on the retailer’s full-year results statement posted on 8 April, Black praised its support for its colleagues, especially through fully paid absence for those over 70, the vulnerable and the pregnant.

He also hailed its extensive community initiatives, as well as its toil to keep stores stocked, expand online capacity by 20% to date and assist the most vulnerable and NHS workers.

“We assert it deserves immense credit and thanks for its efforts to date, including keeping stores stocked, expanding online capacity by 20% to date, assisting the most vulnerable and the NHS workers,”​ Black said.

£650m-£950m in COVID-19-related costs

He highlighted Tesco’s recruitment of 45,000 extra staff in response to the spike in demand caused by consumer stockpiling. This, together with additional distribution and store expenses, would incur £650m-£920m in COVID-19-related costs, according to the UK’s top grocery retailer.

Commenting on the replacement of Tesco chief executive officer (CEO) Dave Lewis by Ken Murphy, with Murphy said to take up the role in October, Black said: “While Mr Murphy will undoubtedly be his own man, we see chairman John Allan as an experienced and effective operator, and we know that Mr Lewis speaks very highly of his replacement.

“As such, we anticipate a strong level of strategic continuity for the foreseeable future, which to us is just fine. That said, what sort of consumer economy Mr Murphy inherits in Tesco's markets remains to be seen – grounds for caution, we suggest.”

Tesco reported total global sales for the 53 weeks ended 29 February of £56.5bn, down 1% at constant exchange rates on the previous financial year. As part of that, UK and Republic of Ireland sales represented £44.9bn, excluding VAT and fuel, and were up 0.2% at constant exchange rates. Pre-tax profit fell by 18.7% from £1.6bn to £1.3bn. However, the figures were calculated before the impact of the pandemic had really been felt.

Packaging

The company said it had worked with its suppliers over the period to reduce packaging use. For example, it had replaced plastic-wrapped multipacks with plastic-free multibuys on Tesco and branded tinned food, and had price-matched loose fruit and vegetables to pre-packed products.

Commenting on the effect of panic-buying in its annual results report, Tesco stated: In the first few weeks of the crisis, significant panic-buying (c.30% uplift in the UK) cleared the supply chain of certain items. This has now stabilised across the group and more normal sales volumes are being experienced.

It said it was working to increase the capacity of its online retailing arm, but cautioned that, at this stage, “there is simply not enough capacity to supply the whole market​”. Most purchases would still have to be made from bricks-and-mortar stores.

Tesco local community support amid pandemic

· Ongoing monthly donations of £3m of food via its Community Food Connection scheme and distribution centres;

· £15m of food to be donated to FareShare and the Trussell Trust over the next 12 weeks and a further £1m donation between the two;

· £2m funding from Bags of Help community donation scheme to charities helping the most vulnerable;

· £2m to help with extra costs in supporting people in need as part of its partnership with the British Red Cross;

· More than £1m of funding for stores to support local community causes;

· 1m free meal parcels for front-line NHS workers, supporting 'SaluteTheNHS.org' initiative;

· Construction of its first dedicated NHS Nightingale Hospital pop-up store, at Birmingham NEC

"COVID-19 has shown how critical the food supply chain is to the UK and I'm very proud of the way Tesco, as indeed the whole UK food industry, has stepped forward,” ​said Lewis.

“In this time of crisis, we have focused on four things: food for all, safety for everyone, supporting our colleagues and supporting our communities. Initial panic-buying has subsided and service levels are returning to normal. There are significant extra costs in feeding the nation at the moment, but these are partially offset by the UK business rates relief.

“Tesco is a business that rises to a challenge and this will be no different. I would like to thank colleagues for their unbelievable commitment and customers for their help and understanding. Together, we can do this."

Related topics: COVID-19, Business Leaders

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