Grocery Guru Episode #26: Discussing Sainsbury's Preliminary Results with Covid Costs of £485m

Join Andrew Grant and Darren A. Smith in the twenty-sixth episode of the Grocery Guru Discussing Sainsbury's Preliminary Results with Covid Costs of £485m, digital sales doubling, and 1,900 innovative products to be launched.

You Can Read the Full Issa Brothers Episode Transcript Below:

Darren A. Smith:

Welcome to episode 26 of the Grocery Guru. We're here with Andrew Grant. Andrew, how are you?

Andrew Grant:

Good morning. Very good thank you Darren.

Darren A. Smith:

Cool, and I think we're continuing our series of looking at results. So we've looked at Morrisons previously, we've looked at Tesco. It's now our friends at Holborn.

Andrew Grant:

Yeah, you were going to say Stamford Street and show your age, weren't you?

Darren A. Smith:

I was.

Andrew Grant:

Yeah, no, we're getting towards the end of results season. I suppose, you know, those Sainsbury's results, you've read them.

Sainsbury's preliminary results with covid costs

 

Darren A. Smith:

I have.

Andrew Grant:

More of the same really that we saw with Tesco and Morrisons. Everybody, all the supermarkets, all the food grocers, doing incredibly well out of COVID, but at a cost.

Darren A. Smith:

That's true. So we're looking at the preliminary results for the 52 weeks ended 6th of March '21. What was the biggest highlight for you, the COVID cost?

Andrew Grant:

No, I think you're going to touch on that in a second, but for me, it's online. We've talked about it in several of these episodes, but their online sales have doubled from 8% of their business to 17% of the business. Most importantly, they're now saying that they're profitable online sales. So what the pandemic seems to have done is got all of them over that base cost line of running trucks and having to pick stuff in stores. You've got a lot of fixed costs there. They didn't have the volume before to make it profitable. All of a sudden it's kicked their online, or their home delivery operations, into profit, which is good news for, I guess, the shareholders going forward.

Darren A. Smith:

That makes sense. So we're saying now that one in five customers are ordering online.

Andrew Grant:

Yeah.

Darren A. Smith:

They've managed to make it profitable, so they've got over their hump, whatever that was 10%, 15%. Okay, all right. The one I do want to raise is the COVID costs, because it's so [inaudible 00:02:03]. So these guys are saying, I'll just read it out, "Offset by £485 million worth of direct COVID-19 costs."

Andrew Grant:

Yeah, I mean, their profits are down 39% on the back of that.

Darren A. Smith:

Wow.

Andrew Grant:

Yeah, I mean, a huge hit, and just have a look at the amount of Perspex in store, and the amount of stickers saying, "Two meters apart," and the number of extra security guards. I know when we were shopping during the first lockdown, Sainsbury's were the toughest on the rules.

Darren A. Smith:

Right, okay.

Andrew Grant:

Yeah, I can remember going in with my other half and being told to stand apart from your own wife in the Sainsbury's line, which I thought was slightly over the top at the time.

Darren A. Smith:

In our local [inaudible 00:02:51] store, which is quite small, there's a big queue at the front of the store, but what people have realized is you queue at the front of the store, but actually you can go in the back and there's no one there.

Andrew Grant:

Yeah. But yeah, I mean, huge extra costs. I don't know, maybe it's the cynical side of me, but if I was the finance director I think I'd be throwing everything at one-off COVID costs to maybe mask some under-performance elsewhere. But I didn't say that.

Darren A. Smith:

No, and I certainly wouldn't repeat it. So we've got a statutory loss for Sainsbury's, before tax, of £261 million, statutory loss. Wow.

Andrew Grant:

Yeah, a lot of exceptionals in there. I mean, their operating profit,