UK’s Tesco Estimated $1.1 Billion Cost of Coronavirus Impact amid the Rise of its Products Demand

The UK’s biggest retailer company, Tesco PLC (Tesco) projected that the coronavirus impact would cost the company up to 925 million pounds ($1.1 billion) for its business maintenance during the virus pandemic and no profit was likely for the company for the current financial year. Since the national lockdown forced everyone to stay indoors, the company has recruited many workers to substitute those who were on leave to fulfill the rising demands for essential items especially groceries.

Estimated Cost of Coronavirus Impact

The lockdown has benefitted Tesco’s businesses, which deal with supplying daily-used and essential items of the households, as partly due to the rise in demand for online shopping for essential items. Earlier, it was expected that Tesco’s wholesale business might be severely affected by the closure of restaurant and cafe customers in the country.

Despite the demand rises, the retailer company maintained that it was also facing a surge of higher costs of its operations due to several factors. Sources reported that the government’s measures including social distancing policies that restrict the number of shoppers in-store at any one time, and the expanding of Tesco’s online delivery operations, staff bonuses, and hiring more employees had incurred heavy expenses for the company.

The company made an estimation of the extra costs and projected that the costs related to the health crisis could be between 650 million and 925 million pounds. Among the challenges, the shortage of the existing staff and hiring more to fill the vacant workforce has proved a major problem for the company in the situation of sharp rising demand.

The company said that it had recruited more than 45,000 workers in the last two weeks alone in Britain to make up the requirements of the workforce and meet the additional demand. The CEO of Tesco, David Lewis told reporters on a conference call that the company currently had around 55,000 employees absent from work.

Surge in Demand

The retailer group said on Wednesday, April 8, 2020, that if the global market restored to normal by August, the extra expenses of the company including staff increase and operations costs would be managed by higher sales and relief from a business tax introduced by the government to help companies.

Citing the 14% rise in underlying operating profit for the year ended Feb. 29, Lewis explained along the lines of the company’s broadly expectations, “There are significant extra costs in feeding the nation at the moment but … Tesco is a business that rises to a challenge and this will be no different.”

The company, which has about 3,800 stores in the UK and Ireland and supports a UK grocery market share of 27%, has witnessed a surge in demand as the lockdown forced people to buy essential goods such as toilet roll and pasta online during the course of the virus pandemic. According to sources, “Industry data last week showed UK grocery sales leaped more than a fifth to a record 10.8 billion pounds in the four weeks to March 22.”

It was reported that Tesco made an operating profit before one-off items of 2.96 billion pounds in its 2019-20 financial year while it proposed a full-year dividend of 9.15 pence per share, up 59% on the year before. On this development, Lewis said the company was justified to avail such benefits due to its extra efforts.

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