Tesco sales slump 4pc as shoppers rein in spending
Sales slump: Tesco (SHAUN CURRY/AFP/Getty Images)
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Sales at Tesco's Irish stores have slumped by more than 4pc as the retailer braces for the full impact of the recession to come.
Reporting group operating profits of £3.2bn (€3.62bn) for the 53 weeks to the end of February, Tesco said same store like-for-like sales here fell 4.2pc in a year as consumers reined in spending.
Tesco Ireland said that while its operations here recorded overall sales of €3.15bn -- up 5.2pc on the previous year -- the boost was achieved on the back of new store openings. The retailer opened 16 new stores in Ireland in the last financial year, bringing its total to 116.
Tesco Ireland boss Tony Keohane said 2008 was "challenging", adding that the retailer adapted its prices and product range to reflect changing consumer demand. Tesco has revealed that its low-cost Cashsavers range, introduced last year, accounted for 7.5pc of sales in Ireland.
As Irish retailers struggle to cope with a surge of shoppers crossing the Border to avail of lower prices and weak sterling, a recent briefing document described the damage being done to the Tesco brand here -- by virtue of its almost exclusive association with higher prices compared to the North -- as "unacceptable".
Poached
It's been estimated that about 4pc of the total Irish grocery market has now shifted across the Border, while discounters such as Aldi and Lidl have also poached business from larger operators here.
Tesco Ireland is also sourcing significantly more products from the UK for delivery to its distribution centres in Donabate and Ballymun, in Dublin, meanwhile, in order to itself capitalise on weaker sterling. Tesco said that a combination of very tight cost control and international buying has helped it to lower its prices.
Investments
"These investments have become even more necessary given the steep rise in cross-border shopping," it said.
Shares in Tesco closed nearly 5pc higher in London yesterday as investors digested its full-year performance.
Its UK operation fared significantly better than that in Ireland, with sales in stores open at least a year there rising 3pc, excluding petrol receipts, during the 53-week period.
Trading in the six weeks since the end of February in the UK has also proved resilient, rising 3.4pc. Tesco tills take in about one in every three pounds spent in the UK grocery market.
But it has also lost market share in the UK as consumers drift to discount competitors including Wal-Mart's Asda.
- John Mulligan
