Tesco's Irish revenue to reach €3bn after strong sales growth
Tesco's revenues in Ireland are likely to rebound to more than €3bn in the current financial year after the global retailer reported a robust 7.7pc sales growth here for the six months to the end of August. Based on an estimated 9pc profit margin, Tesco will probably post a profit in the region of €280m in the current fiscal year at its Irish arm.
Tesco's chief executive designate Philip Clarke, who's replacing outgoing veteran Terry Leahy, said yesterday that in Ireland, the retailer had "continued a remarkable turnaround following a restructuring of the business last year". He added that despite Ireland's economy being "lacklustre", Tesco continued to make "good market share gains" in the country and delivered "strong profit performance".
Tesco's sales in Ireland in the last financial year fell 7.5pc to just under €2.9bn as customers reined in spending and the retailer suffered as shoppers took advantage of weak sterling to shop in Northern Ireland. In the first half of this financial year, like-for-like sales at Tesco's stores in Ireland rose 6.1pc, were up 7.7pc on a constant currency basis and were 4.9pc higher at actual exchange rates.
In its statement to investors, Tesco added that it had made "fundamental changes" in Ireland last year to cope with the effects of the "unprecedented economic contraction", and maintained that customers had responded "positively" to improved pricing and that significant uplifts in volumes had "more than offset" the impact of lower prices.
Last year, Tesco sought 140 voluntary redundancies, most of them at its head office in Dublin, while it also began importing many of its products directly from suppliers in the UK, bypassing Ireland-based peers.
The retailer operates over 120 stores in Ireland, employing about 13,500 people, and earlier this year announced plans to open a further seven stores and refurbish others at a cost of €113m.
Shares in Tesco closed flat yesterday at £4.40 (€5.05), even as it said group sales, excluding VAT, climbed 7.1pc to £29.7bn (€34.1bn) and underlying pre-tax profit was 14.1pc higher at just under £1.8bn (€2.07bn) for the first half. Trading profit was 9.1pc up at just under £1.7bn (€1.95bn).
Speaking to investors, Mr Leahy said the performance had been particularly boosted by robust international trade, while he claimed that the "headwinds of recession" had given way to the "tailwinds of recovery". He maintained that UK consumers had "mentally moved in to recovery" mode. The retailer expects its US Fresh & Easy chain to be profitable by 2013.