Sunday 21 January 2018

Tesco Irish sales drop 3pc, as new taxes hit demand at grocery chain

John Mulligan

John Mulligan

TESCO have said the new property tax is denting consumer confidence here but the retail giant also saw declines in sales elsewhere in Europe.

TESCO have said the new property tax is denting consumer confidence here but the retail giant also saw declines in sales elsewhere in Europe.

Releasing a first quarter trading update, the British grocery chain said that like-for-like sales at its Irish arm tumbled 3pc in the period. That compared to an average 5.5pc like-for-like decline across its European operations outside the UK.

"In all markets, consumers continue to exercise caution in their shopping habits, as they face the direct impact of a variety of austerity measures linked to the tough economic environment," the group said.

"The impact of these external pressures increased in Ireland, with a significant reduction in consumer sentiment and spending following the announced introduction of a local property tax on residential properties.

But while austerity measures are hitting the retailer, more intense competition from German discounters Aldi and Lidl are also affecting its sales in Ireland.

The most recent retail data for the grocery sector from Kantar showed that Tesco's lead in the near €10bn a year Irish grocery market is slipping. Its market share fell to 27.6pc from 28.4pc in the 12 weeks to May 12. Aldi and Lidl boosted their combined share to 13.6pc from 11.6pc.

In the UK, Tesco's market share fell to 30.2pc from 30.8pc in the 12 weeks to April 14.

Shares in Tesco had slumped over 4.5pc by lunchtime yesterday, wiping £1.3bn (€1.5bn) from its market capitalisation.

LIKE-FOR-LIKE SALES

The company said that its like-for-like sales excluding VAT and petrol in Britain, its biggest market, fell 1pc in the first quarter.

Tesco chief executive Philip Clarke said there had been a "small but discernible impact" on frozen and chilled convenience food sales as customers shunned products after horse DNA was discovered in some Tesco foods.

"Conditions outside the UK remain challenging and we have broadly maintained our performance from the fourth quarter of last year," insisted Mr Clarke. "Whilst we are not expecting economic conditions to improve in the near term, we have a customer-focused plan for the year in each of our markets which takes this into account, and we will maintain a disciplined approach to investment and cash flow as outlined in April."

In Poland, like-for-like sales slumped 8.2pc and in the Czech Republic by 9pc. Last week, Tesco announced that the chief executive of its Irish arm, Tony Keohane, is stepping down from the role. He's being succeeded by Philip J Clarke – no relation to the group CEO. Mr Keohane will remain as non-executive chairman of the Irish business.

The Tesco group chief executive has been struggling to get Tesco back in shape since cracks started to show in its operations.

He pulled the plug on the group's 'Fresh & Easy' venture in the United States and is investing heavily in improving store layouts in the UK and hiring more staff to improve customer satisfaction.

The poor first quarter "immediately puts pressure on the full-year outturn," said Darren Shirley, an analyst at Shore Capital. Tesco now has to deliver same-store sales growth of 1.6 for the rest of the year in order to meet estimates, he said.

Irish Independent

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