Tesco sales plummet by 3.9pc during first quarter
Published 15/06/2011 | 05:00
Tesco's sales in Ireland fell 3.9pc in the first quarter of the year, with the bruised Irish economy also crimping the retail giant's overall international performance.
Releasing first quarter results yesterday that fell short of analyst expectations, Tesco said that group sales, excluding petrol, rose 6.7pc in the period. In the UK, sales excluding VAT and petrol fell 0.1pc year-on-year in the quarter and were down 0.7pc quarter-on-quarter.
In Ireland, where Tesco enjoys some of its highest profit margins in the group, sales excluding petrol were 0.2pc lower quarter-on-quarter. It is the largest grocery retailer in the country with a 27.3pc share of the market.
Chief-executive Philip Clarke maintained that the group had made a "good start" to the new financial year, but warned that headwinds remained.
"Uncertainties remain but with early, encouraging, signs of better performance emerging in both the UK and the US, I am confident that this start will provide the platform for another year of growth and rising return on capital employed for Tesco," he said.
But investors were slightly more cautious. Analysts expected Tesco to post UK sales growth of 1.5pc including VAT but excluding petrol for the quarter. In the event, they were up 1pc.
The company also continues to encounter challenging conditions in its range of electronic goods. Chief financial officer Laurie McIlwee said yesterday that sales of those items were "down and struggling".
But sales of Tesco's 'Finest' range of more expensive prepared foods and wine in the UK climbed 10pc as more consumers decided to dine at home rather than eat out.
While international sales including petrol were 2.8pc higher, Tesco noted that difficulties in some markets had impacted the division.
"Although the economic performance of some markets -- for example, Ireland -- has been a limiting factor, the improving overall pattern of like-for-like increase and market share gain we saw through last year has also been a feature during this period," said Tesco's statement.
In the United States, sales at Tesco's Fresh & Easy chain rose 11pc. Tesco hopes that the unit will break even in 2013.
"International growth is solid, whilst the US should reassure investors focused on the break-even point," said Matthew Truman, an analyst at JP Morgan Cazenove.
Shares in Tesco fell as much as 1.5pc in early trading but later recovered to close virtually unchanged at £4.07 (€4.60).