Sainsbury’s has reported a decline in underlying full-year profits as it plans to incur £500m in additional costs due to coronavirus in the coming financial year.

The grocery retailer has posted a 2% decline in underlying pre-tax profit to £586m in the 52 weeks to March 7, with overall profit before tax rising 26% to £255m, as group sales edged down 0.1% to £32.4bn, down 0.6% on a like-for-like basis.

Sainsbury’s has said that since coronavirus took hold in the UK its grocery sales have risen significantly. Food sales rose 12% in the seven weeks to April 25 in comparison with a 2% rise in the nine weeks to March 7.

This represents an 8% uplift in total sales excluding fuel and offsets 53% and 22% declines across clothing and general merchandise sales in Sainsbury’s stores respectively.

The grocer’s food sales jumped 48% in the week to March 21 amid the peak of stockpiling.

Sainsbury’s has said that provided lockdown restrictions have eased by the end of June it expects its underlying full-year profit to March 2021 to be broadly flat.

The grocer has made this forecast based on the outlook that “a profit impact of over £500m due to significant costs associated with protecting customers and colleagues, weaker fuel, general merchandise and clothing sales and lower financial services profitability” would be “broadly offset by stronger grocery sales and approximately £450m business rates relief”.

Sainsbury’s has said it is deferring its dividend payment “until later in the financial year, when there will be improved visibility on the potential impact of Covid-19 on the business”.

Chief executive Mike Coupe said: “The last few weeks have been an extraordinary time for our business. First and foremost, I want to say thank you to all of our colleagues. They have shown outstanding commitment and resilience over the past few weeks and I am in awe of their adaptability and the efforts they have made to continue to serve our customers.

“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. 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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