British supermarket chain Sainsbury's has today reported a 39% fall in annual underlying profit as strong food sales during the Covid-19 pandemic were outweighed by extra costs and a decision to forgo business rates relief.
But Sainsbury's, the UK's second largest supermarket group after Tesco, said it had started its new financial year strongly and forecast a big rebound in profit.
The company made an underlying pretax profit of £356m in the year to March 6, in line with its guidance of "at least" £330m but down from the £586m it made a year earlier.
Grocery sales rose 7.8%, general merchandise sales were up 8.3% and online sales doubled, but the company said it incurred an extra £485m in costs due to the pandemic.
It also returned business rates relief offered by the UK government worth about £410m.
Shares in Sainsbury's have increased 7.4% so far this year, partly buoyed by bid speculation after Czech billionaire Daniel Kretinsky increased his holding to 10%.
Sainsbury's three major domestic rivals - Tesco, Asda and Morrisons - have all enjoyed strong sales over the last year as coronavirus restrictions closed the hospitality sector for long periods and forced many people to work from home.
However, they have also had to endure the costs of additional workers, staff sick pay and in-store measures to deal with the pandemic.
Earlier this month, Tesco reported a 20% drop in annual profit, while last month Morrisons reported a halving of profit.
Sainsbury's said like-for-like sales, excluding fuel, rose 11.3% in its fiscal fourth quarter, having increased 8.6% in the third.
It said it was comfortable with analysts' consensus forecasts for underlying pretax profit in 2021-22 of about £620m.
"Like our customers, we are all looking forward to things feeling more normal over the coming months and getting excited about a summer of celebration, but we are also cautious about the economic outlook," its chief executive Simon Roberts said.
Sainsbury's upgraded its four-year net debt reduction target from £750m to at least £950m and is paying a full-year dividend of 10.6 pence.