Business Irish

Thursday 19 April 2018

Tesco loses €400m in battle with Aldi and Lidl

Tesco is to launch its own smartphone.
Tesco is to launch its own smartphone.
John Mulligan

John Mulligan

More than €400m worth of sales were wiped from Tesco's Irish arm in the third quarter following a plunge in its business here as the retail giant lost ground to Lidl and Aldi.

Ireland's biggest retailer said that like-for-like sales in the quarter to the end November 23 plummeted 8.1pc as it failed to hold ground in what has become a hugely challenging market.

The slump followed a 4.4pc fall in Tesco's like-for-like sales in Ireland during the second quarter and a 3pc decline in the first quarter.

Cumulatively, it means the retailer has seen hundreds of millions of sales vanish from its 142 stores here.

In the 12 months to the end of last February, Tesco Ireland notched up sales of €3.15bn here, with virtually all of that being derived from existing stores. During the previous 12 months it had opened just five new smaller-format stores in Ireland: four 'Express' outlets and one 'Metro'.

The slump in sales here has set alarm bells ringing at Tesco. Its Irish operation has traditionally been one of the most profitable in the group, with the unit delivering margins far higher than those achieved in Tesco's other markets.

But industry sources say Tesco hasn't responded fast enough to competition from German discounters Aldi and Lidl, and that investment in its stores hasn't been sufficient to retain customers.

"They've taken the theatre out of shopping," claimed one source. "Their stores are sterile."

Releasing its third-quarter results, embattled Tesco said that its performance in Ireland during the period "continues to reflect extremely challenging conditions for consumers, compounded by a more intense competitive environment".

"Our recent introduction of 'Price Promise' in Ireland will help to improve customer perceptions of our relative price position, allowing us to emphasise points of differentiation in our offer," it added.

The retailer has pledged to shoppers here that if their groceries end up costing more than at either Lidl or Aldi that it will refund them the difference.

Tesco – the world's third-largest retailer by sales – has been struggling to regain lost footing in all its markets.

In the UK, it said that like-for-like sales in the third quarter, excluding petrol and VAT, fell 1.5pc. In every single one of its overseas markets, sales fell in the period, led by the decline in Ireland. In Thailand, they declined 6.9pc, in Slovakia they fell 5.7pc and in the Czech Republic they were 4.9pc lower.

Tesco has also recently completed its exit from the United States, after a failed foray into the market with its 'Fresh & Easy' brand.

Chief executive Philip Clarke is in the midst of a £1bn (€1.2bn) plan to revitalise Tesco's UK operations, by revamping stores and hiring more staff.

"For us it isn't about market share over a quarter or a half. It's about delivering a business which is sustainable," said Mr Clarke.

Irish Independent

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