Fresh food helps to lift Tesco's Irish sales to €2.57bn as group profit soars
Tesco's sales in Ireland, including fuel, rose 3.6pc to €2.57bn in its last financial year, helped by its "competitive price position", according to the retailer.
The Irish unit posted like-for-like sales growth, excluding fuel, of 2.7pc. Tesco is again vying to be the biggest grocery retailer in Ireland, a position it had held for more than a decade until it yielded it in 2014.
Figures from research group Kantar Worldpanel this week showed that Dunnes Stores and Musgrave-owned SuperValu each have a 22.1pc share of the Irish grocery market, with Tesco on 21.9pc.
Tesco said that its performance in Ireland during the last financial year saw its volume sales climb 4.2pc.
"Fresh food volumes were particularly strong, growing by 5.2pc year-on-year," it said.
Tesco has 150 outlets in Ireland and is due to open its latest store here, in Dublin's Liffey Valley, in May. In its annual results, Tesco said it expects to add a total of 81,000 sq ft to its Irish portfolio in the current financial year, to bring the total to 3.56m sq ft.
Asked about its international strategy yesterday, Tesco CEO Dave Lewis noted that Ireland keeps the group "absolutely busy".
Shares in Tesco were more than 6pc higher in London at one stage yesterday after it said that group sales excluding fuel rose 2.3pc to £51bn (€58.3bn) in the 12 months to February 24 at actual exchange rates.
The group's operating profit before exceptional items soared 25.9pc to £1.64bn (€1.87bn) on a constant currency basis. It beat its own profit guidance.
The retailer has endured years of turmoil, hit by German discounters Aldi and Lidl in the UK market, and rocked by an accounting scandal.
Mr Lewis was parachuted in from Unilever in 2014 to turn Tesco around.
He pointed to improved metrics as evidence of a more solid financial foundation for the group, including the fact that its net debt has tumbled to £2.6bn from £8.5bn three years ago.
In the UK, where it's the largest grocery retailer,Tesco posted like-for-like sales growth of 2.2pc in the last financial year, with nine consecutive quarters of growth now under its belt.
But it warned that market conditions there have remained challenging, with continued cost price inflation. Last month, Tesco also completed its takeover of UK wholesaler Booker.
The £4bn (€4.5bn) Booker purchase by Tesco is Dave Lewis’s boldest move yet, providing Tesco with access to the faster-growing catering segment of Britain’s £200bn (€229bn) grocery market.
Mr Lewis, who joined shortly before the accounting scandal was uncovered, first stabilised Tesco, then got it growing with a focus on more competitive prices, streamlined product ranges, better customer service and much improved supplier relationships.
The group, which competes with Sainsbury’s, Walmart’s Asda and Morrisons, said it was firmly on track to deliver its medium-term targets which include cost savings of £1.5bn and earning between 3.5 pence and 4 pence of operating profit for every pound customers spend by 2019-20. It had a margin of 2.9pc in its last financial year.
Bernstein analyst Bruno Monteyne, who has an ‘outperform’ rating on the stock, said Tesco could now achieve the margin target a year early.
Tesco also said it will place an increasing focus on cash generation and “sustainable returns to shareholders”, raising the prospect of share buybacks and special dividends.
Tesco’s shares are still below where they were when Mr Lewis joined. Some investors are cautious about the ongoing challenge of discounters and online players. (Reuters)