Tesco PLC (LON:TSCO) said retail profits for the year to next February will only be in line with the previous period despite high demand seen during lockdowns.
Retail operating profits are expected to come in at around £2.7bn, while Tesco Bank is to swing to a loss of between £175-200mln from last year’s profit of £193mln due to potentially higher bad debts amid a drop in global GDP.
READ: Tesco faces investor revolt over CEO pay
The FTSE 100-listed group estimates extra charges of £840mln for the full year following safety and payroll adjustments during the pandemic.
These costs will be partially mitigated by the UK business rates relief of £532mln and additional food sales.
In the quarter to May 30, sales in the UK and rest of the world jumped 8% to £12bn, central Europe rose 4% to £968mln while Tesco Bank tumbled 26% to £198mln. Group sales were up 8% to £13bn.
The first quarter saw a 48% increase in online sales, as the grocery store doubled its online capacity to 1.3mln orders per week.
Shares rose 1% to 228.8p on Friday morning.
"We like Tesco's current approach and strategy, which we think is right for the times it now operates," Shore Capital commented.
"We see scope for the final FY2021 outcome to be better than the current mood music... The equity is very much on our positive watch list."
--Adds analyst comment, shares--