Around 30,000 Tesco (TSCO.L) staff are currently off work, with absences on the rise as staff fall ill, self-isolate or shield at home.
Britain’s biggest supermarket’s chief executive Ken Murphy said on Thursday it had “clearly seen a spike” in absences in recent weeks.
Approximately one in 10 staff is now off, according to Murphy, with absence rates “materially higher” than during its second and third quarters.
The details, confirmed on a call with analysts and journalists, come after Tesco published a trading update for Christmas as well as its third quarter, which ended on 28 November.
The update said around 35,000 more temporary workers had been taken on, helping Tesco deal with both absences and what Murphy called “abnormally high demand” fuelled by COVID-19 and government restrictions.
Around 7,000 of Tesco’s most vulnerable colleagues are shielding at home on paid leave, Murphy added. The increased severity of the pandemic in recent months is expected to push up its COVID-19 costs, from covering absences to PPE, sanitisation and extra bonuses.
It estimates full-year costs of £810m ($1,106m), up from its previous estimate of £725m.
But absence rates remain significantly lower than during the first nationwide lockdown in the first half of 2020. Murphy said at one stage 50,000 workers had been off, before absences dropped in the second half of the year as infection rates and restrictions eased.
He also highlighted the company’s new policy to not let customers in stores without masks, though said he was “grateful” most customers were following the rules.
Online shopping ‘institutionalised’
Murphy, who only took over from Dave Lewis in October, also said a “reasonable proportion” of the increase in consumers shopping online seen during the pandemic was “here to stay.”
“It’s just become an institutional part of their shopping habits,” he said. He said the “cannibalisation rate,” meaning the share of online sales diverted from previous Tesco in-store sales, was around 30%.
But he acknowledged Tesco’s leaders “don’t have a feel” for exactly how far shoppers will revert to in-store purchases and to eating out as the pandemic eases.
Online sales tax and rates reform
He also said Tesco continues to back calls for a tax on digital sales, saying store-based business rates had risen “dramatically” despite “no extra sales coming from stores.”
He said the country needed a “fundamental reformation” of the rates system, offset by the new digital tax.
The large sums repaid by Tesco and other supermarkets in business rate relief last month had “put into stark relief just how big the burden of rates is on the retail business,” he added.
Tesco was the first of a string of supermarkets last month to pay the government back the funds saved under the relief, which had been introduced primarily to support closed ‘non-essential’ retailers.
Brexit impact on prices ‘minimal’
Murphy is one of five supermarket chiefs who recently wrote to the UK government warning looming Brexit changes to trade between Britain and Northern Ireland were “unworkable.”
He was asked by an analyst about the impact of any Brexit upheaval already felt since the UK left the EU’s single market and customs union at the start of the year. Firms face new requirements and administration to move goods between the UK, Northern Ireland and EU, affecting supermarket supply chains.
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“We have definitely seen some levels of disruption,” Murphy replied. But he said Tesco had “weathered the storm incredibly well,” because of its preparations in advance. There were some continued issues in “some limited areas,” but overall movement of supplies between Britain and Northern Ireland remained “very strong.”
“We’re working very closely with governments on both sides of the Irish Sea to iron out any residual issues,” he said.
He predicted any impact on prices would be “minimal,” adding: “We’re not planning any price increases into our business in the coming weeks or months as a consequence of Brexit.”
The UK-EU deal provided “largely” tariff-free trade, he noted. Many retailers are reported to be weighing up the impact of potential tariffs on UK products moving to Ireland that originate outside Britain and the EU.
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