StockMarketWire.com - Supermarket giant Tesco reported a surge in first-quarter sales as households stocked up during the Covid-19 crisis, though it warned of flat retail operating profits due to an accompanying rise in costs.

The company also warned of write-downs at its banking division.

Sales for the three months through June jumped 8.0%, and by 7.9% on a like-for-like basis.

Tesco, however, said fresh costs had including paid leave for vulnerable staff, hiring temporary staff to meet extra demand and purchasing safety-related consumables and personal protective equipment.

Tesco said its latest estimate of incremental costs for the UK for the full year was around £840m, which would be partially mitigated by business rates relief of £532m and a contribution from additional food sales.

'Whilst any forecast is inherently uncertain, based on an assumption of a continued easing of lockdown restrictions in the UK, our current expectation is that retail operating profit in the current year is likely to be at a similar level to 2019/20 on a continuing operations basis,' it said.

Losses at the banking division were expected to amount to between £175m and £200m after Tesco upped its bad debt provision.

'In just five weeks, we doubled our online capacity to help support our most vulnerable customers and transformed our stores with extensive social distancing measures so that everyone who was able to shop in store could do so safely,' chief executive Dave Lewis said.

'The costs of doing this have been significant and only partly offset by business rates relief and increased volume.'

'We see the balance as an investment in supporting our customers at a time when they need it most.'

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