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Sainsbury sees massive loss as COVID costs increase


UK retail company, Sainsbury’s, has experienced massive losses throughout the COVID-19 Pandemic.


The firm reported a loss of £261 million, during the financial year of 2020-21, ending March 6th.

The firm reported that the loss is largely attributed to a drastic increase in costs caused by the COVIID-19 Pandemic. According to the Guardian, the firm spent “millions of pounds on protecting staff and customers from the coronavirus.”


Tesco, the largest supermarket chain in the UK, also recently reported an increase in costs this month of up to £900 million so that the giant could continue trading during the pandemic.


Although both firms made a loss, Sainsbury reported only spending £485mn on COVID related costs.


However, despite the sharp increase in costs, the majority of supermarket companies in the UK reported experiencing a nice rise in sales.


Sainsbury’s rivals: Tesco, Asda and Morrisons, have reported having “enjoyed strong sales over the last year as lockdowns closed the hospitality sector for long periods and forced many people to work from home,” the Reuters reports, but, it should be known that all of these firms still had to pay COVID related costs.


Sainsbury itself reported that like-for-like sales, which exclude fuel, rose by 11.3% in its fiscal fourth quarter, an increase from its third-quarter where it experienced an 8.6% rise.


However, these figures may be slightly inflated, if fuel sales were accounted for, the firm would have likely seen a decrease in sales as travelling during COVID-19 decreased due to the lockdown measures.


This decrease in travelling and going out is further supported by the fact that clothing sales decreased by almost 9%, showing that people really dressing up for a night out.


But, despite lockdown measures, the supermarket industry has seen grocery sales rise by 7.8%, how has this occurred?


Well, the obvious answer is online sales, which, according to the Guardian, have doubled during the COVID-19 lockdown.


It is undeniable that during the lockdown, consumer habits have changed to favour online shopping methods as online shopping does not have the health risks associated with COVID-19.


This is especially important for elderly individuals who have had to become technically proficient during the pandemic to use online shopping methods as they are the demographic which is most at risk.


However, although online shopping has enabled these supermarkets to see rising sales, what about other establishments such as corner shops?

Smaller, local businesses tend to have much less capital compared to the supermarket giants such as Tesco, Sainsbury’s and Asda. For this reason, they have been one group that has lost significantly during the COVID pandemic.


The Guardian reports that convenience stores have seen an “overall 9% drop in sales,” showing how local business has been hurt especially during the pandemic.


Truth is, these corner shops cannot compete as they do not have the infrastructure necessary to be able to reliably create a home-delivery service, so, they have gone out of fashion as consumer habits have changed.


However, the likelihood is that convenience stores will still be around as once the COVID-19 pandemic ends, individuals will still use their services to buy certain goods, and, the elderly probably still and will continue using them as they tend to be less busy than supermarkets.


Furthermore, it is not only convenience stores that may see a large loss but workers too. Sainsbury’s have begun a restructuring, putting 1,150 jobs at risk, furthermore, they will be closing 170 “standalone Argos stores.”


This loss of jobs is particularly significant as the individuals working within the retail sector will not have a large safety net due to their low wage which remains low because of the large labour supply.


This will significantly reduce their living standards as their lack of disposable income will lead to an increase in poverty within the UK which may place additional strain on government welfare schemes such as Job Seekers Allowance.


And, despite the people at the bottom losing their jobs, shareholders have seen a slight decrease in dividends from £247 million to £232 million.


So, overall, the COVID-19 pandemic has seen winners and losers, but it seems that despite their large losses, supermarket giants such as Sainsbury, and especially their shareholders, have been impacted less compared to the painful loss in sales and revenue which local business experienced, and, more importantly, the workers, who will see a massive loss relative to their already limited incomes.

 

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Written by Hubert Kucharski

Research compiled by Billy Ryan







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