Tesco’s pre-tax profit fell by 20 per cent to £825m in 2020 despite a pandemic-driven jump in group sales.
The UK’s biggest grocer said it incurred £892m of Covid-related costs during the year and repaid £535m of business rates relief.
The retailer reported a 6.3 per cent rise in group like-for-like sales, including a 7.7 per cent lift in its core British market.
Online sales were up by 77 per cent to £6.3bn, while total retail operating profit hit almost £2bn.
Tesco’s Clubcard helped lift the company’s sales, with its digital app attracting more than 2 million new users.
The retailer held its dividend flat for the financial year at 9.15p per share.
Ken Murphy, CEO of Tesco, described the company’s agility and strength throughout the pandemic as “truly heroic”.
“Our decision to protect and hold the dividend flat for this financial year demonstrates our commitment to shareholders.
“We believe we can create significant further value for them and every stakeholder in our business by continuing to focus on value, loyalty and convenience for customers, underpinned by strong capital discipline.”
Tesco’s three major UK rivals – Sainsbury’s, Asda and Morrisons – have all enjoyed strong sales over the last year, with Covid restrictions forcing many people to work from home.
However, they have also had to endure the costs of additional workers, staff sick pay and in-store measures to deal with the pandemic, which has dented profits.
Michael Hewson, chief market analyst at CMC Markets UK, said that Tesco’s decision to face up to the ‘Aldi Price Match’ campaign has impacted higher costs but expects a swift recovery.
“Tesco said it expects sales volumes to decline as lockdown restrictions ease, however costs are also expected to decline as well.
“This should translate into better margins, and an increase in profits, which should head back to the levels seen last year.”