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Tesco sales soared during lockdown as shoppers switched to buying online, in local stores as well as returning to big weekly shops at the supermarkets.
The UK’s biggest supermarket chain said sales at established stores rose 8.7% in the three months to 30 May, with sales of food increasing by 12%. However, clothing sales dived by a fifth. Online sales rose by 48.5% and sales in convenience stores jumped 10%.
Retail profits for the year are expected to be in line with last year as the chief executive, Dave Lewis, said the cost of adapting to the coronavirus pandemic had been “very significant”, including new safety measures in stores, covering sick pay for vulnerable staff who have had to isolate at home and bringing in 47,000 new workers to help with increased demand. He said he expected additional costs to be close to £920m, the upper end of expectations set out earlier in the year.
“In the last three months the industry has changed beyond imagination,” Lewis said in his last results presentation before handing over to the new Tesco boss Ken Murphy in the autumn.
Lewis’s departure is expected to be marred by a row over pay at Friday’s annual shareholder meeting. His pay rose by more than a third to £6.42m last year after Tesco’s board decided to remove the online grocer Ocado from a list of rivals used to rate performance.
He said that Tesco’s efforts to keep price rises below inflation, including a new price match promise with Aldi, had helped it win shoppers from the German discounter for the first time in more than a decade.
However, the biggest change has been a switch to online, which now accounts for 16% of the supermarket’s sales, up from 9% before. Tesco has more than doubled its weekly capacity to 1.3m delivery slots in five weeks, with an investment of only £4m. The company expects to take £5.5bn of sales online this year compared with £3.3bn last year.
About 590,000 vulnerable customers, including elderly people, had begun shopping online with the supermarket, many of whom had never done so before and the group was confident it would continue to serve them.
“We believe the increase [in shopping online] is permanent,” Lewis said, adding that he anticipated that about 12,000 staff taken on to help with online shopping during the pandemic would stay on.