By Kristy Dorsey

Sainsbury’s has reported a plunge in fuel and clothing sales during the seven weeks to April 25, with the supermarket group predicting continued business disruption until at least mid-September as consumer patterns remain fractured by the coronavirus pandemic.

Mike Coupe, outgoing chief executive of the UK’s second-largest supermarket chain, said food sales in each of the five days at the beginning of lockdown were higher than the busiest shopping days before Christmas. There continue to be “marked changes” in buying behaviour, with customers coming less often but buying about twice as much when they do.

“Very much a return to the weekly shop, but beyond it,” said Mr Coupe, who will retire on June 1 to be succeeded by operations director Simon Roberts.

The cost of keeping staff and customers safe from the virus – including social distancing, hygiene, security and similar measures – will cut profits by £500 million in the current financial year. However, this will be offset by £450m of savings on business rates under the Government’s business aid scheme, as well as higher food sales.

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Under current assumptions, Sainsbury’s anticipates high single-digit growth in grocery sales through the lockdown period, followed by low single-digit growth for the remainder of its first half. This follows a 12% increase during the seven weeks to April 25, which peaked at a surge of 41% in the seven days to March 21, the week before the UK imposed lockdown restrictions.

Fuel sales in the first seven weeks of the current financial year fell by 52%, with the decline accelerating to plunges of 74%, 76%, 78% and 72% in the weeks to April 4, 11, 18 and 25 respectively.

Clothing sales during the seven weeks were off by 53%, though the pattern there was more varied. Sales of other general non-food merchandise were down by 22%. Mr Coupe said the last few weeks had been an “extraordinary time” for the business.

“This is an unsettling time for everyone, but I am incredibly proud of the way the business has responded, continually adapting and responding to customer feedback,” he said. “We will continue to work hard to provide food and other essential products to households across the UK and Ireland who are adapting to a new way of living.”

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His comments came as Sainsbury’s posted a 26% increase in pre-tax profits to £255m for the year to March 7, even though sales remained flat at £32.4 billion. The result was propped up in part by a 55% rise in operating profits from its financial services division, which amounted to £48m on an underlying basis.

The financial services arm – which employs about 1,000 people at the Sainsbury’s Bank headquarters in Edinburgh – is expected to make a loss in the current financial year as bad debts mount up along with rising unemployment. Commission income will also be significantly impacted, with travel money bureaux currently closed and ATM usage far below normal levels.

In common with most other quoted firms, Sainsbury’s said it will defer any decisions on dividend payments until later in the financial year, when there will be “improved visibility on the potential impact of Covid-19”. In addition, no cash bonuses will be paid to executive or senior directors in respect of the 2019-20 financial year.

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“Once the board is in a position to make a decision regarding dividend payments, the (remuneration) committee will consider the impact on shareholders and if there should be any implications on executive pay for the year 2020-21,” Sainsbury’s said.

The group’s 573 stand-alone Argos shops have been closed since March 24, with customers advised to order for home delivery where possible.

Argos sales were 9% higher in the seven weeks to April 25, with demand strongest in the seven days to March 21, up 63%, as consumers equipped themselves to work from and spend more time at home. Growth has considerably moderated since then, with Sainsbury’s predicting sales declines in the low teens for the year as a whole.