The COVID-19 pandemic accelerated the trend towards e-commerce that Tesco had to work hard to capture. The proportion of online sales grew from 9% to 16% of total UK sales by the end of the half year.
The major shift to e-commerce came with c.£533m of extra costs, which includes for more staff in stores and facilitating online orders. The supermarket business is labour heavy, and Tesco warned that the additional costs would be high. Fortunately, further restrictions on pub and restaurant attendance boosted food sales and Tesco benefited from the business rates holiday introduced by the government. Retail operating profit margin therefore held up, increasing by 0.19% year-on-year.
Three quarters of the group’s operating profit are from the UK and Republic of Ireland. Tesco have benefited from the expected spike in food sales brought on by the second lockdown without quite as much of a shock to their cost base.