April 30, 2020 @ 11:58 by Steven Hugill
The financial impact of coronavirus on UK business has been further laid out after retailers and banking operators warned of significant hits to sales and profits.
Supermarket Sainsbury’s and fashion operator Next have both taken major earnings hits from COVID-19, with Lloyds Banking Group and HSBC suffering similar woes.
Sainsbury’s says it expects to take a £500 million blow to annual profits thanks to costs associated with keeping staff and customers safe, and weaker demand for general merchandise, clothing and fuel.
High street and online retailer Next says it has been knocked by “a faster and more steeply than expected” economic contraction in March, which contributed to a 41 per cent fall in full-price sales for the period between January 26 and April 25.
However, bosses say that “even in our worst scenario…the mitigation we have put in place means the company can operate comfortably within its cash resources and will end the year with less net financial debt than at the end of last year.”
In the banking sector, Lloyds endured a 95 per cent fall in profits during its first quarter to March 31, with the figure tumbling to £74 million from the £1.6 billion recorded in the same period a year ago.
The lender has set aside £1.43 billion to cover the expected slump caused by the coronavirus pandemic.
Rival HSBC saw reported pre-tax profit drop 48 per cent in its first quarter to around £2.5 billion after COVID-19’s impact was augmented by weakening oil prices.
Reported revenue was also down five per cent as a result of adverse market impacts in life insurance manufacturing and adverse valuation adjustments in global banking and markets.
Speaking about coronavirus’ effect on operations, Mike Coupe, Sainsbury’s chief executive, said: “The last few weeks have been an extraordinary time for our 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.
“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.”
Reacting to Lloyds’ financial update, António Horta-Osório, group chief executive, said: “The economic outlook is clearly challenging with the longer-term outcome dependent on the severity and length of the pandemic and the mitigating impact of Government and other measures in the UK and across the world.
“Throughout this period of uncertainty we will continue to work closely with the Government, regulators and other authorities and use the strength of our balance sheet and business model to ensure that we play our part in supporting our customers and the UK economy.”