How quickly judgements can be questioned in the court of public opinion.

It was only a matter of days ago that Britain’s supermarket chains were the flavour of the month, hailed among the heroes of the coronavirus crisis for their efforts in feeding the nation. 

But after Tesco’s full-year results, two statistics that commentators found much less palatable combined to leave a sour taste – the £635m that the grocer agreed to pay out to shareholders as a final dividend, and the £585m business rates rebate it is receiving from the government.

Many were quick to join the dots between those two figures and come to the blinkered conclusion that the business rates rebate – and therefore, the taxpayer – was essentially funding a pay-out to Tesco’s investors.

That of, course, is simply not the case. Tesco’s dividend was based solely on top- and bottom-line performance in the 12 months ending February 29 – the fiscal year in which it completed its five-year turnaround plan and made a group operating profit of £2.5bn.

“It was Boris Johnson and his government that vowed that no business would go bust as a result of the coronavirus pandemic, not supermarket bosses”

Admittedly, electing to pay a dividend amid the coronavirus crisis wasn’t fantastic PR. A host of other retailers, including Morrisons, WHSmith, Halfords and Scs, have all suspended or canned their dividends in recent weeks owing to the extraordinary circumstances they find themselves in. 

But Britain’s biggest retailer would not be paying its shareholders 6.5p per share if its 2019/20 financials did not allow it to do so. Its decision had nothing to do with the coronavirus outbreak or its business rates holiday – both of which are only impacting Tesco in its new fiscal year.

Boss Dave Lewis was at pains to point out that “every pound” of the £585m business rates rebate the grocer is set to receive will be “invested in ensuring that Tesco is able to support Britain’s shoppers through this crisis period”.

And it will. Depending on whether ‘normality’ returns at the end of July, the end of August or the end of September, the additional costs incurred by Tesco during 2020/21 will be anything from £650m to £925m.

The retailer insists that additional food sales, the rates rebate and “prudent” management of its operations will only “largely offset” those ballooning costs, rather than combine to pump up profits. The story told by its grocery rivals will carry a similar narrative. 

Yet that hasn’t prevented Tesco’s dividend row escalating into a broader debate about whether it – and its food retail rivals – should be accepting the government’s business rates rebate at all.

Intense scrutiny

Frankly, that is a debate that shouldn’t have been given an iota of air time. It has long been accepted that the business rates system is an unfair, archaic policy in dire need of fundamental reform. Has it suddenly become fit for purpose for supermarkets, simply because they have had a couple of weeks of strong sales and one retailer has managed to pay a dividend? Of course it hasn’t.

But one MP, Kevin Hollinrake, maintains that supermarkets are “the clear winners” from coronavirus and suggests they don’t need “a taxpayer windfall” that was designed “to help firms through a crisis”. He goes on to urge those food retailers to distribute their rebates to small and medium-sized enterprises instead.

“Clear winners”? Food sales might have spiked in the early days of the pandemic as consumers stockpiled, but normal demand is returning. Data from Edge by Ascential has revealed that stock levels are stabilising, and reports over the weekend suggested that sales in supermarkets were down as much as 10% last week.

Let’s not forget, food sales in the UK carry wafer-thin margins and revenues from supermarket retailers’ higher-margin categories, such as clothing and electricals, have been decimated during this crisis.

Without wishing to sound callous, it is simply not the responsibility of Tesco, Sainsbury’s, Asda, Morrisons, Aldi, Lidl, Waitrose, Iceland or Marks & Spencer to preserve the futures of our SMEs. It was Boris Johnson and his government that vowed that no business would go bust as a result of the coronavirus pandemic, not Dave Lewis, Mike Coupe, Roger Burnley or David Potts.

“Supermarkets are the heroes, not the villains, of the coronavirus crisis – and don’t let anyone tell you otherwise”

Sainsbury’s boss Coupe and chair Martin Scicluna will find themselves in the line of fire when they face the City on April 30. Its final dividend, and the messaging that surrounds any payment or lack thereof to its investors, is likely to come under equally intense scrutiny.

But as Coupe, Scicluna and other retailers deliberate long and hard over such decisions, their collective responsibility, now more than ever, must be to their businesses, shareholders, staff and customers.

The business rates rebate is helping grocers, just as much as any other retailer, by allowing them to preserve that focus. It is providing them with the headroom required to maintain a solid financial foundation and safe working and shopping environments while ramping up headcounts, online capacity and distribution capability in the rapid and radical manner that is required during this emergency. Tesco has illustrated that none of that comes cheap.

As Shore Capital analyst Clive Black put it: “The quid pro quo from the government is that they told supermarkets to go out there and feed the nation.” Mission accomplished, in my book.

So, forget dividends. Forget business rates rebates. Supermarkets are the heroes, not the villains, of the coronavirus crisis – and don’t let anyone tell you otherwise.